The Rule of Thumb (har, har) is to use to make the alternating bass note the root note also known as the tonic and the fifth (dominant) or third (Mediant) of the chord. So if you are in E the 1st note you alternate thumb is open E and the second E 4th string 2 fret also E an octave higher. These are unison notes but you could use the open A note too. A is the 4th note up from E. The same choices await you with the other chords. Some intervals resolve better than others some don't. This is diatonic harmony. Thirds and minor 6ths are good.
Happy next teaches us "Skip to My Lou" and its basically what we have been doing slightly different and it'll throw you unless you use your ear and listen to the intervals but the TAB s there in all its glory. After a while I am able to pretend I am doing it right and its fun. A bit like getting a drum beat going with your bass drum only using your thumb. As I skip ahead however I see that's its going to take me some practice time to get to feeling comfortable with the alternate steady thumb and picking at the same time. You however may already be good with your fingers in which case you couldn't ask for a better primer to step into some pretty slick folk blues guitar playing. You will learn the neck but more importantly become a crawling king snake. Happy also shows us Drop D tuning in fact he makes the rest of the session and a lot of lesson II about Drop D tuning. So if you are looking to learn Drop D playing this is a good place to start. Happy makes things interesting and challenging. I would say that if you put your mind to it you can learn a lot from this guitar fingerpicking lesson. I have yet to discover a perfect introduction to guitar fingerpicking and all the ones I do recommend are superior in my opinion. If you like the Blues choose this one but you will also be learning classical repetoire later in the series in lesson III.
Lets now look at Disc 2 & 3 boxed together.
If the wind will not serve, take to the oars. –Latin Proverb