The oxymoron that is used to comment upon the contradictions at the heart of this poem and of the rebellion that this poem comments upon is captured in the refrain you have identified. Consider, for example, the various characters who are identified as being involved in this uprising and the differing ways in which they are viewed. There is the Countess Marikiwicz, who possesses "ignorant good-will" and the upper classes who desired to express a sense of responsibility and leadership because of their status in life. There is the revolutionary schoolteacher whose fondness for Irish myths only serves to isolate him from the realities of day-to-day life. There is also MacBride who is a "drunken, vainglorious lout." Yet, in spite of the negative way in which these characters are described, the speaker also feels respect and admiration for them and for the stand they are making.
Such contradictions are highlighted through the stone imagery that is used to accompany the weighing of the wins vs. the lossess of the uprising. Note how Yerats contrasts the resolute and inexorable steadfastness of the rebels with the "living stream" of life. There is admiration as Yeats praises their fixed permanence on the changes they want to see happen, but at the same time, there is fear that such fixedness can risk transforming these characters from humans into something much worse:
Too long a sacrifice
Can make a stone of the heart.
The refrain therefore perfectly captures the ambivalence of the speaker, as he recognises the beauty in this uprising, but also sees that it is a "terrible beauty" because of the contrast between the good aspects of this uprising and the profoundly negative ones.