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The Decemberists – The Hazards of Love 1 (The Prettiest Whistles Won't Wrestle the Thistles Undone) Lyrics 16 years ago
I think this is a fairly good interpretation of the album.
However, I'm not sure that Margaret does ever deliver the child, I think it dies in utero with her. Remembering that this is a fairy tale setting, with a shapeshifting man, i think that we can also safely presume that they would not simply kill themselves to avoid the hazards of love. The river seems to have a spirit of its own (seemingly a fairly malevolent spirit - or perhaps it's in cahoots with the forest queen) and it comes to take what William has promised to it. They end by lamenting that although they are dying they can be together in death without the "hazards of love" that hounded them throughout life.

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The Decemberists – The Abduction of Margaret Lyrics 16 years ago
Not the backside of a horse. The withers of a horse are the lumpy area at the base of the cervical spine (neck region) which is in front of the saddle. Clearly she has been thrown across the front of the saddle/shoulders of the horse and is hanging on for dear life: "innocent fingers in fetters" fetters being the restraints he is using upon her.

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