Re: Song lyrics
Fairy tales often end with "And they all lived happily ever after."
The song is saying (I think) that if real people got happy endings like the people in fairy tales do, he would still be holding her. I assume they are not together any more. It doesn't mean literally holding her, like a piece of luggage, but able to embrace her and be close to her.
*Or maybe it's "him." I don't know.
I'm not a teacher, but I write for a living. Please don't ask me about 2nd conditionals, but I'm a safe bet for what reads well in (American) English.