The Babe is more than swadling Bands; Throughout all these Human Lands. (63-64)
In a coded way, Blake is saying that the soul is more than the physical body, just like a baby is more than the swaddling bands that wrap around him/her.
He who mocks the Infant's Faith Shall be mock'd in Age & Death. He who shall teach the Child to Doubt The rotting Grave shall ne'er get out. He who respects the Infant's faith Triumphs over Hell & Death. (85-90)
Since Blake sees faith as being a basic part of human beings, destroying faith makes people less human, whereas supporting it helps make them more human.
We are led to Believe a Lie When we see not Thro' the Eye Which was Born in a Night to Perish in a Night When the Soul Slept in Beams of Light. (125-129)
The material world is like a nightmare that the soul is having—it deludes itself into believing the nightmare is real by trusting too much in its physical senses. Blake wants people to try to reach beyond those five senses.
God Appears & God is Light To those poor Souls who dwell in the Night, But does a Human Form Display To those who Dwell in Realms of day. (129-132)
In the material world, God doesn't really appear, except in a distorted form as the light that comes from the sun and makes things visible. But, in heaven or eternity (the "realms of day"), God appears as a living human reality.