Who would be upset at the possible desecration of the sabbath, other than (a faction of) the Jews?

Rabbi Meir Kahane's Kach party was a faction of the Jews (of Israel). I think it was a stupid and evil organisation, and that Kahane very nearly deserved his fate. I hate Kahane-ites with a passion. Does that mean I hate Jews?

The holy people, in the stanza in question, are the ones who were upset at what they viewed as the desecration of the sabbath, and, in the stanza in question, they are the ones who crucified Jesus.

No, they're not, and I'll prove it to you (well, I can dream). Each of the five verses of LOTD consists of two couplets. Each of the couplets makes a separate statement, with the second line completing or amplifying the first one, e.g.

I danced in the morning when the world was begun,
And I danced in the moon and the stars and the sun,

I came down from heaven and I danced on the earth,
At Bethlehem I had my birth.

With me so far? Now, two of the couplets have a second line beginning with 'they', and here it's obvious that 'they' refers to the previous line:

I danced for the scribe and the pharisee,
But they would not dance and they wouldn't follow me.

I danced for the fishermen, for James and John -
They came with me and the dance went on.


However, three couplets begin with 'they':

They whipped and they stripped and they hung me on high,
And left me there on a Cross to die.

They buried my body and they thought I'd gone,
But I am the dance and I still go on.

They cut me down and I leapt up high,
I am the life that will never, never die;

"They buried my body" and "They cut me down" have no grammatical antecedents: 'they' is obviously meant generically -
'I was cut down'
'somebody buried my body and people thought I'd gone'

The 'they whipped' couplet can be read the same way - in fact, it only makes sense if you read it that way (every Sunday School child knows that it was the Romans who had Jesus stripped and scourged).

There is no reason to believe that 'they' refers to 'the holy people', and no reason whatsoever to believe that 'the holy people' refers to the Jews collectively. End of story.

If what you're saying is that somebody who already believed that Jews were responsible for the crucifixion, and was already predisposed to blame the Jews collectively for any crime carried out by Jews individually, could read the words of that song in such a way as to confirm those beliefs, then you've got a point. But any such person would already be an anti-semite, and would be able to find confirmation for their beliefs from a multitude of sources. I can think of good reasons to rewrite songs, but trying to avoid the risk of appearing to confirm the prejudices that a minority of people already hold isn't one of them.