"to" is the destination and "by" is the location. I am going to the beach. By the beach, I will sunbathe. The lyric, to me, is saying "Take me to the ocean and then walk with me beside the ocean."

1) "to" this means you are going from where you are "to" the ocean, so say the car park to the ocean 2) "by" this means besides, so you could walk along the shore and describe it as "by the ocean" the use of down here may be mentioning the slope of the beach but there is resonance with the bible "he will lead me besides the still waters" which is supposed to show God's tenderness towards his creation. The writer may be casting an allusion towards this line.

BTW that's a GREAT song!