There's a whole level of psychological stuff happening with regard to Billy that becomes apparent through his song lyrics. "Slipping" is a tug-of-war between the Billy and Horrible aspects of his personality.
There's a school of thought that Horrible's devices have all historically malfunctioned because Billy knows, deep down, they could hurt or kill someone, and that being a supervillain isn't really going to impress Penny.
Dr. Horrible:No sign of Penny /Good I would give any /thing not to have her see...
"I'm Captain Hammer and these * indicates his fists* are not the hammer. The hammer is my penis. I'm Captain Penis. I'm a dick."
Building on that, yes, I know this is a stretch, but... if he's captain penis, that mean's he's not only a "tool", but an "organ". As dickish as he was, he was still the only thing keeping the town safe from evil.
Better yet: "peen" is a slang term for penis. This line becomes outright clever when you remember that there is such a device called the ball-peen hammer.
The reason he doesn't want Captain Hammer to fire is not because he wants to save his own skin, but because he doesn't want anyone else to get hurt, which is in-keeping with his non-violence rule. (One of the reasons he won't fight Johnny Snow is because there are children near the battle-ground.)
"I bring you pain, the kind you can't suffer quietly…Fire up your brain, remind you inside you're rioting…Society is slipping." He doesn't want to hurt people. He wants them to actually think.
"Hammer, meet nail!" may sound like a lame joke placed in to rhyme, untill you realize what he means by that: "Captain hammer, look at the lengths your incessant beatings have driven me to!
Think of it more this way, where's the last place you want to have a nail jammed? In your penis.
Doctor Horrible got everything he ever wanted and all it cost him was Penny.
In So They Say, the news anchors have the line "Next up, who's gay!" Who sings next? Captain Hammer's male groupie!
After repeated re-viewings of Doctor Horrible's Sing-Along Blog several things that were subtly hidden under the Dramedy became apparent — particularly Billy's realization that being evil will not really impress Penny. But what really hit hard was realizing later about Billy's desperate attempts to keep his Horrible persona in check, and vice-versa. The lyrics of Slipping and Dr. Horrible's theme are almost line-for-line a tug-of-war between Billy and Horrible, making it that much more tragic.
This troper posted a rather long analysis of Doctor Horrible's Sing-Along Blog in the WMG, positing that Billy was actually suffering from multiple personality disorder, and giving a break down of Billy/Horrible's mental division, and how Dr. Horrible was gaining more and more control over time. The whole theory came together whilst reading the WMG someone suggested about Billy having a mental disorder, but didn't state which one.
After seeing the container labeled "Wonderflonium: Do Not Bounce", I figured it was just a quick joke. I thought the gun was damaged by the fall, but then I read a post on this site, and realized... it * bounced* . And that set the wonderflonium off.
When I first found out that the official name for "On the Rise" is actually "My Eyes", I just shrugged and kept calling it whatever I wanted to. But after I got the soundtrack and spent a rather worrying amount of time with it on a loop as background music, I suddenly figured out that it's called "My Eyes" because it's not just about the plot, it's about how the exact same situation can appear totally different to another person.
I was confused with Dr.Horrible's lack of enthusiasm in the final number the first time through. Yes, he just lost the love of his life, but his goal in life had been reached. Why couldn't he just avenge her death? After watching it a second time, it hit me. Penny's death killed his passion for evil. Those last few seconds were the symbolic death of his humanity. He didn't have anyone to share his success with so he just kinda gave up.
Penny's dying line, "Captain Hammer will save us," seemed a little out of place. It seemed odd for her to place faith in a man she had seen to be an ass, and as not particularly heroic. Several viewings later it clicked. She was just trying to hurt Dr. Horrible.
In "A Man's Gotta Do", Penny is, in her dying breath, conveying that she isn't something Dr. Horrible/Billy should be in love with because she ultimately still believes in Captain Hammer as a god-send. The whole point behind Dr. Horrible is that he isn't "blind" to the goodness of people but sees how horrible everyone is and how he must be their ruler to make everything "right". However, he has a blindspot for this girl, who was not actually what he wanted her to be (like himself: cynical and, well, evil), and she proves she's still a vapid and shallow person who can't see past the terror of the moment as to what is good and what is bad. In essence, she is just another girl, nothing special. It boils down to, in the end, not a life lesson in good and evil (though that is there as well) but the much simpler meaning of "Don't let a girl blind you". Or perhaps, alternatively, "Love creates blissful blindness"
It might also also be a confirmation of something Billy ranted about during Slipping: Captain Hammer does save people. He's a jerkass extraordinaire, and can sometimes cause massive collateral, but he's still beating up somebody who thinks of the Thoroughbred of Sin as a role model. The reason they don't call him on his behavior is that he might stop. (Mind you, he does stop. What happens? A bank gets robbed in the very next scene!)
I always thought that Penny recognized Dr. Horrible as Billy, and was trying to use her last breath to comfort him. She thinks Dr. Horrible's running around still, and it follows that her Billy must be afraid like everyone else.
Penny represents all the good in Billy. When she died, Billy's emotional ties to the world were severed. He originally went into villainy, ironically enough, because he wanted to help people. He had the same goals as Penny, but as he said, he needed to solve the problem at its base, not treat the symptoms. He became a villain so he could help the world. With the death of Penny, he achieved villainy and status in the Evil League of Evil, but he no longer cared about helping the world. He's just an empty emotionless shell; the last line of the show is "And I won't feel...a thing". So in the end, he's a supervillain because instead of being in it to save the world, he's in it for the evil. It took Penny's death for him to realize that the world was beyond saving.
This is a small thing, but when Captain Hammer meets Penny at the landromat and they kiss, the shot cuts away almost ridiculously quickly. Why? Because we're supposed to be sympathizing with Billy, who can't stand to look at it.
I recently noticed something else. When Captain Hammer meets "Billy" for the first time, he mentions, "It seems you have a little crush." How would Captain Hammer know that? Oh, right, Dr. Horrible mentioned it on his blog. Which, as he also stated, Captain Hammer watches. Whoops. You REALLY need to watch what you say on that blog, Doc.
What happens when superpowers clash? Innocent people in the middle get hurt.
Throughout the show, but especially during So They Say, various things are visible throughout Dr. Horrible's lair. Among them are a poster about what I think said "Folic Acid," x-rays, CAT scans, one of those plastic mock-ups of the digestive system, etc. Combine this with the fact that he actually has the medical symbol on his lab coat, and I put it to you that he is an actual doctor, most likely with a very small practice.
I just noticed on viewing 'Slipping' for the nth time that victims of Dr. Horrible's Freeze Ray are aware through it, as evidenced by Captain Hammer instantly going for the punch in the face when it wears off. Which means his original intention to use it on Penny to give him the time to find the words would have backfired.
Ordinarily, when a villain finds himself in the position that Dr. Horrible is in while pointing the death ray at Captain Hammer, he would cackle maniacally, gloat, reveal his eeevil plan, then pull the trigger and have his invention blow up in his face in a sort of John Henry poetic justice, thereby demonstrating that cunning technology is no substitute for Good Old-Fashioned Grit and Determination. But in this case, the Dr. is conflicted and hesitates, doing the right thing and not the thing which would have gotten him killed. Conversely, the hero is supposed to do the right thing and have the villain dragged off in handcuffs (so that he can escape for the next episode), not execute him on the spot. Captain Hammer, therefore, gets the karmic retribution intended here for the villain by behaving as the villain is supposed to; ironically, Dr. Horrible gets into the Evil League of Evil precisely because he isn't, well, all that bad.
Except that if Dr. Horrible had pulled the trigger at that moment, the death ray would have worked. The only reason it exploded was because the death ray (specifically, the Wonderflonium that powers it) bounced on the ground when he dropped it when Captain Hammer punched him in the face.
I recently realized that Dr. Horrible is being hilariously dense when he says "Apparently the LAPD and Captain Hammer are among our viewers." He assumes that everyone is waiting for him, when in fact it makes a lot of sense that both the police and a superhero would be present at "the mayor's dedication of the Superhero Memorial Bridge".
He's not saying that they were there for him—he's saying that they were expecting him and ready for what he was going to do.
After re-watching the ending, I thought about it, and when the movie started, it was Billy trying to be Dr. Horrible. But the last two words is Dr. Horrible, trying to be Billy.
The tragic ending itself. The whole thing was Dr. Horrible's Origin Story. What made him the villain he was destined to become. His "Mister Freeze" story, if you will.