"Kathy's Song" is written in the voice of a song writer from England who is currently away from there and from the woman he loves. It's raining wherever he is, which is making him even more homesick for England, with its frequently rainy weather and with Kathy's presence.
As the rain brings back memories of time spent with her, the song writing he's supposed to be doing gets lost in the dreams. "My mind's distracted and diffused, My thoughts are many miles away...And a song I was writing is left undone"
The implication is that he chose to leave Kathy, perhaps thinking that it would be better for his career if he left England and moved to another location that had a larger market for song writers. Now, however, he is filled with doubts: doubts about his ability to create believable song lyrics, doubts about the values that form the basis of his songs, doubts about his ability to survive without Kathy's presence.
In the final stanza, he acknowledges his dependence on her for his continued survival, comparing himself to the rain that washes away without any purpose or reason to continue.
And as I watch the drops of rain Weave their weary paths and die I know that I am like the rain There but for the grace of you go I.