Ultimately, who knows what Morrissey meant, and how does it really matter? Why not take it at face value and as satire? He's fairly adept at finding things that can simply be described and which is self-satirizing, so to speak.
You are repressed
But you're remarkably dressed
Is it Real?
This can be read as sarcasm or satire ending with a pointed rethorical question, or as stating a paradox, or voicing approval, or simply stating the obvious, followed by an anxious and earnest question. They're all possible.
In terms of style, it's obviously very camp (a song that is ostensibly about the importance of being hairdressed? What could possibly be more camp?) and that I think is a key to the song. Everything in this lyric is posed in terms that are way over the top. A characteristic of camp is to simultaneously mock and celebrate its subject matter, and it has to be experienced from within - you can't really separate what's being said from the way it is said, it's an attitude as much as a message.
To put it differently, the song offers several viewpoints, and simultaneously mocks all of them without retracting them. The awesome power of the hairdresser is acknowledged, but in terms that are so over the top that they can scarcely be taken with a straight face, and are also mocked by the unmistakeable jab at the shallowness of the lyric's own sentiment. The hairdresser is offered sympathy (for being sued), but is also gently mocked (having placed himself in the predicament by his over-nervousness). The verse about London can just as well be a ringing endorsement as a biting denounciation, seen against the rest of the lyrics it actually more or less serves as both. If parts of the lyric can be seen as a critique of pointless shallowness, then that is simultaneously undercut by the narrators flamboyant affirmation and acceptance of the importance of a good haircut and the cost of a bad one. The being-sued episode also offers a counterpoint to this - being tangible proof that it is real, and important; By threatening to land the poor hairdresser in the dock as a result of an unsatisfactory haircut.
It's a song to laugh with while you're thinking, and shouldn't be attempted reduced to something as dull and obvious as an essentially sombre critique of shallow values made by means of jokes and irony. That contradicts everything Morrissey is about, to me. Whatever this songs says, it says with an affectionate - and arch - smile. In the end, perhaps that's the main point.
cheers