This famous lyric is one of the five "Lucy" poems of Wordsworth.
The first stanza describes the death of Lucy. "Slumber" is a euphemism for death. Lucy his lover is his "spirit," the essence of his life. Wordsworth is not frightened that she is dead, because as soon as death "seals" her it protects her from everything mundane. Once she dies she is set free from and protected from all earthly corruptible influences.
The second stanza describes what happens to Lucy after her death. After she has been set free from the corruptible influences of this earth, she becomes subsumed into the physical universe. The latter state is superior to the former state when she was alive in this world.
The vague living-Lucy of this poem is opposed to the grander dead-Lucy who has become involved in the sublime processes of nature. Lucy is actually more alive now that she is dead,because she is now part of the life of Nature, and not just a human 'thing.'