This man had kept a school And rode our winged horse; This other his helper and friend Was coming into his force; He might have won fame in the end, So sensitive his nature seemed, So daring and sweet his thought.
Now Yeats is talking about some guy who kept a school and "rode our winged horse." Yeats is kind of relying on his Irish audience to know his references. But for those of us who were born more than 80 years later, we need to look this dude up to find out that his name was Padraic Pearse.
Like the Countess, this guy was one of the leaders of the Easter Uprising in Ireland. And yes, the dude was the founder of a boys' school in Dublin and he was also a poet. Yeats throws in the mention of the "winged horse" because this mythical beast (or Pegasus) was the official animal of the poet in Greek myth. Now that's some solid symbolism going on there.
Next, Yeats mentions "this other" dude, who was a helped and friend to Pearse. The guy Yeats is referring to is probably Thomas MacDonagh, who was a poet and dramatist who also helped with the Uprising. Yeats seems to feel a special pique of regret for this guy, since he was "coming into his force" or just starting to get good as a writer when he was executed for fighting in the Uprising.
In this section, you can also see Yeats starting to get a little more obvious with some of the rhymes he's been throwing down in this poem. Earlier, the rhyme might have been hard to detect. But here, he's kind of spelling it out for us with pairs like "horse" and "force" or "friend" and "end." Now this might be because Yeats is actually starting to talk about another poet, or maybe he's starting to feel some emotion in what he's talking about. It's kind of hard to tell—both for us and for Yeats himself, it seems.
According to Yeats, MacDonagh might have even gotten famous if he'd kept his nose out of the fighting, because the guy had a sensitive nature and his thought was "daring and sweet." Remember here that Yeats was already a famous poet by this time, and he had no interest sticking his neck out just so Ireland could be independent from England. He had his career to think about.
Throughout these lines, Yeats keeps saying things like "That woman" of "this man." It sounds like he's actually holding out an old photograph and pointing at each of these people as he describes them. This has the effect of showing us that these people lived only as memories because they're now dead or in prison for life.
This other man I had dreamed A drunken, vainglorious lout. He had done most bitter wrong To some who are near my heart, Yet I number him in the song;
Whoever this next guy is, Yeats really doesn't sound like a big fan. There's really nowhere else in this poem where he uses a phrase that's as harsh as "drunken vainglorious lout." He says that he'd always thought of this guy as a drunken oaf or hick.
Yeats says he especially didn't like this guy because the dude had done bitter harm to people Yeats cared deeply about.
Okay, we'll tell you—the guy Yeats is talking about here is Major John MacBride, a man who was once married to Maud Gonne, who just so happens to be the woman Yeats spent most of his life obsessing over. Yeats clearly resented this guy for being married and unmarried to Maud. But still Yeats overcomes his sour grapes and says "Yet I number him in this song," meaning that he's willing to give MacBride his due for fighting for the Irish cause.
He, too, has resigned his part In the casual comedy; He, too, has been changed in his turn, Transformed utterly: A terrible beauty is born.
As Yeats winds down his second stanza, he says that Major MacBride has "resigned his part" and died like many of the other revolutionary leaders. But the fact that Yeats calls the Uprising a "casual comedy" suggests that he still isn't sold on whether or not the whole thing was worth the trouble. The phrase "casual comedy" also involves some alliteration that makes it sound even more, well, casual. It's almost verging on some of the silliness that Yeats puts in the first stanza of this poem.
Nonetheless, Yeats says that MacBride has "been changed" through his sacrifice. He's no longer just a living jerk. Now he's a dead hero. Yeats closes the stanza with everyone's favorite oxymoron by writing, "A terrible beauty is born," which he'll repeat a couple more times in the poem. In fact, you could just go ahead and call this phrase a refrain, meaning that it works in this poem kind of like the way a chorus works in a pop song.
The fact that Yeats keeps returning to this phrase suggests that it holds some power to unlock the meaning of this whole poem.
And in this context, he seems to be suggesting that even though the bloodshed of the Uprising was terrible, there's something beautiful about the sacrifice that people were willing to make for something they believed in.