Yeats was Irish, and in literal terms this is a reference to the Irish Catholic funeral custom of a Wake.
"Blinds" here refers to a window-covering. In Yeats' era, wooden shutters, sometimes known as blinds, were commonly used to shut out light instead of curtains. Covering windows to signify a death is a practice which dates back to Victorian times, both ensuring privacy for the mourning family and a notice to possible visitors that a death has occurred inside the house.
A Wake is an extension of this mourning, during which mourners spend a night in the house with the corpse. Although sombre, attendees at a Wake often do their best to celebrate the life of the deceased: there will be food and alcohol and sometimes music and dance. Hence the lines:
Pull down the blinds, bring fiddle and clarionet,
Let there be no foot silent in the room,
Nor mouth with kissing nor the wine unwet.
And, as you might expect, the windows are usually covered during the wake. Hence: "pull down the blinds". Mirrors are also traditionally covered, although a window may be left open in the room where the corpse is resting.
Of course, the line also has symbolic meaning. "Pull down the blinds" is suggestive of closure, of an ending: it is an act undertaken at the end of each day. It takes place as dark is closing in, and brings further darkness, shutting out all outside light from the room. Hence it is, as a phrase, a powerful euphemism for death.
