I have some thoughts on what Dressed in Black means.

1. “Dressed in black” phrase is not connected to clothing or the color black. It is as allegorical as “feeling blue” in this song.
2. For me, it is clear that this song depicts a relationship between a man and a woman. Both are real, physical, normal people, not some archetypes (especially this song appears closer to the end of album, which means at least some earlier songs give context to this relationship).
3. “I'm beggin for more again / But, oh, what can you do / When she's dressed in black?”. From this part in Verse 1 it is obvious that “dressed in black” is something negative and that it makes someone more locked in.
4. “My mind wanders endlessly / […] / Not when we're alone / And she's dressed in black". Now I notice a theme of appearance vs. reality. She is flirtatious and nice when she is surrounded by people, but as soon as she has no one around, she stops being active. Also, in verse 2 it is obvious that “dressed in black” is either a mood or a state of being, likely negative because it ruins the romance.
5. “As a picture of herself / She's a picture of the world / A reflection of you, a reflection of me”. A metaphor that basically says she has no innate identity or personality. She just ‘reflects’ the world.
6. “And it’s all there to see / If you only give in / To the fire within”. I am not certain what this means, but I think it says when she is not “dressed in black”, when she has passion (“fire within”), you can see the vibrancy of the world going through her.
7. “Shadows fall onto me / As she stands there over me / And waits to encompass me / I lay here helplessly”. This passage leads me to believe that when someone is “dressed in black”, they become not only cold, but also possessive. Secondly, the man is not happy to see her like that.
8. I think “dressed in black” refers not to upsetness, but to moral darkness. Some desire to ‘be dark/immoral’. Alternatively, this could refer to desire for lack of morals or desire for acting stereotypically amoral.
9. So my conclusion is this song about the woman opening up and revealing her immoral side (probably as a result of considering her partner being trustworthy and open enough to accept this side of her), but he is scarred by that revelation.