Some lyric interpretation:
Babylon sisters = fallen women, fallen and degenerate lifestyles - he realizes he is getting too old for this shallow experiences.
Cotton candy= nose candy, a reference to cocaine.
"Tell me I'm the only One" is a delusional reference to relationships with prostitutes, as he wants to believe he's more than just a client.
Babylon is Biblical, about a fallen people. Steely Dan uses as an analogy to indulgent lifestyles and self-destructive behavior, a theme that also shows up in their song "Kid Charlemagne
." In this case, the narrator is indulging in prostitutes. (thanks, Jo - Southern Texas)