Okay so first off this is the Manfred Mann Earth Band song. Only everyone thinks of Springsteen on account of his cover was so good. Plus, you know, Springsteen.
But it's Mann. And the kids in the song, they are going out to Greasy Lake which is greasy on account of homeless people living around there using it for bathing and washing dishes and stuff. The locals call them Gypsie Angels instead of homeless, and so there's your first metaphor.
Remember this is back in the Summer of Love, the Age of Aquarius, Hair, Woodstock and all that. You weren't disheveled and badly in need of a bath you were groovy, baby! You weren't unemployed, lost and looking to get drunk and screw you were a free spirit getting in touch with the cosmos. You weren't rutting you were making love in the dirt.
So danced all night to a soul fairy band means pretty much what it sounds like. They screwed around until they passed out. Maybe the Gypsie Angels were howling in the background, beating sticks on empty tin cans, who knows? They were young and having fun. Nowadays we'd all have seen the selfies by now. Where's the mystery in that?
