It's not Blind Pete, it's "Lying Pete" as in 'Lying Pete always said you'd hang'. I think the only significance I make out of it, is that Lying Pete was a liar, so when Jake doesn't end up hanging, what Pete apparently said wound up reflecting his nickname.
"Don't mind me, man, I'm just effen with ya…" - Janis Joplin
It's Blind Pete (see memorable quotes) and basically it's just code. Emmett is telling Jake he's going to bust him out at dawn in a way Jake can understand and the lawmen can't. Blind Pete, I take it, was someone they knew in their past.
Sooner, I didn't think it was code- I figure Jake just assumed his brother would get him out. So I think Pete was, as you say, just somebody they once knew.
The code part is when Emmet says "Tomorrow at dawn he'll be proved right." - because Jake already knows Langston intends to hang him at 10:00. So, when Emmett says "Tomorrow at dawn" he's letting Jake know he'll break him out at dawn.
It was code, when Jake was picking the lock in the cell he said something like "Blind Pete could do this all by sound or touch." When Emmett said "Blind Pete always said you'd hang. I guess tomorrow at dawn he'll be proved right" he was telling Jake to pick the lock at dawn while Emmett was distracting the sheriff.
Wow. I've seen this movie many times and never caught that. Thanks. I always figured Blind Pete was just some reference character who was mentioned but never seen, like Vera in "Cheers" or Maris in "Frasier".