This song seems to me to be the very definition of “bittersweet”. The ending is ambiguous, and can be interpreted in a romantic manner, or as yet another failed illusion; I prefer the former. I’ve never thought it was unreleavedly depressing, preferring to see it is a modern riff on the theme of foregiveness and redemption.
Some trivia for you fact fans:
Shane was born on Christmas Day.
He had another christmas single with his latter band the Popes called I think, A Christmas Lullaby. I like it though it’s not a patch on Fairytale.
Apparently, the hospital lost him initially.
However, potential tragedy was averted. He was quickly identified by his mom - as he was the only baby in the maternity ward sucking on a bottle of whiskey. 
I can’t believe this debate is still going on. This is going to turn into one of those weird, volatile Dope issues, isn’t it - like dryer lint and shoes in the house?
(jackelope explained my take on the song much better than I was capable of.)
NDP, I thought your apology earlier was very classy and I appreciate it.
In regard to covers, I have some fondness for the version by the Irish Tenors - sample here.
They cut out the vulgar bits, but somehow it works for me. Not as well as the original, which remains a favorite.
Here’s the BBC 1 version of the offending verse, re-written with today’s sensibilities in mind:
