The original song: "Mirror Mirror" by Blind Guardian, on the album "Nightfall in Middle-earth"
Lore-analysis:
Far, far beyond the island
We dwelt in shades of twilight
Through dread and weary days
Through grief and endless pain
The island is Tol Eressea, also known as the Lonely Isle or Britain. The sub-optimal situation referred is the war of the Noldor (High Elves, but they're more like Chimer when you get right down to it) against Morgoth.
It lies unknown
The land of mine
A hidden gate
To save us from the shadow fall
The lord of water spoke
In the silence
Words of wisdom
I've seen the end of all
Be aware the storm gets closer
The hidden city of Gondolin was revealed to the Noldor by Ulmo, the lord of waters. Ulmo warns the Noldor that all their works must come to an end, in accordance with the Prophecy of the North.
(Chorus)
Mirror Mirror on the wall
True hope lies beyond the coast
You're a damned kind can't you see
That the winds will change
Mirror Mirror on the wall
True hope lies beyond the coast
You're a damned kind can't you see
That tomorrows bears insanity
The song is badly titled. This has nothing to do with mirrors, or normal fairy tales. The "true hope" is the Valar. The Noldor forsook the Valar in their flight from Valinor. Later, Earendil goes to Valinor and pleads on behalf of the Two Kindreds for the Valar to come save everyone. They do this because Earendil asked nicely.
Gone's the wisdom
Of a thousand years
A world in fire and chains and fear
Leads me to a place so far
Deep down it lies my secret vision
I better keep it safe
The wisdom of a thousand years refers to the time in Valinor. "A world in fire and chains and fear" refers to Middle-earth, which is a terrible place to be in the First Age. The secret vision which need to be kept safe is Gondolin is secrecy. With secrecy gone, they get overrun.
Shall I leave my friends alone
Hidden in my twilight hall
(I) know the world is lost in fire
Sure there is no way to turn it
Back to the old days
Of bliss and cheerful laughter
We're lost in barren lands
Caught in the running flames
Alone
How shall we leave the lost road
Time's getting short so follow me
A leader's task so clearly
To find a path out of the dark
King Turgon decides to ride forth to the Nírnaeth Arnoediad (Neer na eth Ar no di ad). Before that, Gondolin stayed out of the wars of Middle-earth, to stay secret and safe. Nírnaeth Arnoediad means "The Battle of Unnumbered Tears". You may infer how it played out. The was the first in the series of dreadful events that made the life of one Turin Turambar an absolute trainwreck, but that's neither here not there.
(Chorus)
Even though
The storm calmed down
The bitter end
Is just a matter of time
Gondolin survived the Nírnaeth Arnoediad, but still is due to fall.
Shall we dare the dragon
Merciless he's poisoning our hearts
Our hearts
Dragons in Middle-earth are pretty horrifying. Not in terms of sheer power, but Paarthurnax is a saint next to Glaurung. If I try to go any further on this point, I'll have to write a second essay on The Children of Hurin.
How shall we leave the lost road
Time's getting short so follow me
A leader's task so clearly
To find a path out of the dark
No, little Noldor, there's no hope for any of you.
Never disparage Tolkien for mary-sue characters or black-and-white morality. The Lord of the Rings was his idea of a children's book.