THE EXPLANATION:

Her mother represents heaven.
Spike is the Devil.
(When I say He and Him, I am referring to The Devil)
The mental institution is really heaven welcoming her back.
But Buffy doesn't believe her mom when she tells her that Buffy belongs there; she doesn't believe she can ever be happy, so she leaves.
She comes back to the house and sees the demon killing her friends. She does nothing to save them, and wonders why they aren't angry at her for not saving them.
She decides the reason they aren't angry at her is because they are not real, that it is her destiny for her to be in heaven with her mother, and that they were no longer going to keep her trapped on Earth, in Sunnydale.
She accepts her mother's offer and goes to join her in "heaven," thinking G-d has given her a second chance at happiness.
For a few minutes, she experiences happiness and peace.
However, it has been all a cruel joke. Her mother disappears, leaving Buffy alone and miserable once more. She then finds herself falling, until she is in Spike's crypt. (Really the devil's lair).
Although I do not mention it in the poem, it turns out that no one is ever allowed to leave heaven. Since Buffy broke this rule, she is never allowed back. When she dies, she will go to Hell for an eternity of torment.
The Devil (Spike) is offering for her to go with Him there now, to be his eternal queen, to dance with Him forever. This time she accepts, for the greatest hell for her is not feeling anything. All she wants to do is to feel, and He is the only way for this to happen.
She goes to Hell with him
At the end of the poem, she asks G-d for forgiveness. She also asks G-d not to watch her, not to think of her; she is forever lost, she is forever to suffer.