Rand demonstrates it well in the next chapter (I'll try to avoid spoilers here) with Dagny's interaction with a guard.
The concept that I'm referring to is the act of indecision. How can indecision be an act? I'll let others better able to articulate the definition do so but will demonstrate how it works.
Those of us who are blessed with raising teenagers have probably heard the retort 'whatever' in response to any number of requests made of them. The proper rejoinder is thus-
"Since 'whatever' encompasses such a vast array of possibilities, I'll select from this list of chores that need done...." You can see how the vagueness of the 'whatever' can be used against them (for their own good ,of course:) ).
Dagny has been saying 'whatever' for a long time, that allowed the Looters to make her decisions for her. She was abdicating her responsibilities by _not_ making a choice.
You can choose a ready guide from some celestial voice;
If you choose not to decide you still have made a choice.
But I agree with you - you see what the lyricist (I think it was Peart) meant, but the notion of, as the stanza concludes, "choosing" free will begs the question of whether such a thing is actually possible. Could you be fated to choose free will? That little ripple of logic has caused many a late-night dorm room or faculty lounge discussion. It also helped light Europe on fire during the Reformation.
Oh, and you're right, Parsy is cheating with that Annie Oakley reference (although now that I think about it I don't believe Oakley ever actually shot anybody. Calamity Jane, then). Dagny doesn't actually blow anyone away until the next chapter in a scene more reminiscent of Walter Mitty than James Bond. "He drew his Webley-Vickers..." :-)
Skepticism, then, is not avoidance of option; it isoption of a certain particular kind of risk. Better risk loss of truth thanchance of error—that is your faith-vetoer’s exact position. He is activelyplaying his stake as much as the believer is; he is backing the field againstthe religious hypothesis, just as the believer is backing the religious hy-pothesis against the field. To preach skepticism to us as a duty until “suf-ficient evidence” for religion be found is tantamount therefore to tellingus, when in presence of the religious hypothesis, that to yield to our fearof its being error is wiser and better than to yield to our hope that it maybe true. It is not intellect against all passions, then; it is only intellect withone passion laying down its law. And by what, forsooth, is the supremewisdom of this passion warranted? Dupery for dupery, what proof is therethat dupery through hope is so much worse than dupery through fear?
from The Will to Believe