Manly Wade Wellman is one of the authors whom Gary Gygax lists in Appendix N without indicating the title of a single book that inspired him in his creation of Dungeons & Dragons. If I had to hazard a guess, I'd suggest it was the short stories of Silver John of which Gygax was thinking. Originally appearing separately in magazine form during the 1950s and 1960s, they were collected under a single cover by Arkham House in 1963, with new linking material written by Wellman especially for the occasion. The collection gave these stories a somewhat greater currency than they'd had previously and it's possibly in this form that Gygax encountered them, although I have absolutely no evidence of this.
Silver John, so called because he carries a guitar with silver strings, is a mysterious wandering balladeer, who possesses a remarkable knowledge of the supernatural. He travels from place to place in the Appalachian Mountains of North Carolina, where he uses his knowledge, courage, and wit to do battle with occult enemies of various sorts, many drawn from the folk tales and legends of the region he knew so well. John is a picture perfect example of a "wise fool," a simple, unassuming man whom others underestimate despite the fact that he clearly possesses a keen insight others lack.
The Silver John stories are folksy picaresque tales with a strong moral undercurrent that I imagine would have appealed to Gary. As I said, I have no idea if he ever read them, let alone took anything from them as he was co-creating D&D, but I think there's much here to recommend. They're a great example of how to take real superstitions and folk beliefs as a foundation and a model for spinning some of one's own creation. Wellman's ability to seamlessly intertwine his own creations with those of backwoods Appalachia is remarkable to read and ought to be an inspiration to referees everywhere, whether or not they were to Gary Gygax.