Hah, does anyone ever get tired of this conversation? It feels like it's been argued every which way to Sunday, and still nobody agrees.
I hate Seeing Red. I haven't watched it since, and don't plan to. But before somebody jumps on me for that, let me say: I do NOT pretend it doesn't exist. That would be an insult to Buffy and women everywhere who have actually experienced this situation. To somehow blame the victim is NEVER right, no matter if it's Buffy, a girl who got too drunk at a party, some poor woman who walked down the wrong street at night or any other scenario.
I agree with Dan K, though, with the belief that Spike didn't know what he was doing, at least not fully. The expression of horror on his face when she finally kicks him off tells me he just wasn't in his right mind, or to borrow a phrase from a meta I read, that "the lights were on but nobody was home." That does not excuse him; nothing could. Nor does it defend his character; any man who doesn't realize that the girl he loves isn't playing a role, but is afraid and in pain is one seriously messed up individual.
I think, up until that point, Spike didn't really know how evil he still was. In his mind, he'd molded himself to become something that Buffy wanted, or at least something she craved on some level. He even said, "I'm not good, but I do okay." The fact that he claims he "would never" right after he truly tried to rape her (and denies it with that look on his face) shows his disconnect there. He didn't realize until that moment what he was truly capable of doing. He sees in himself the absolute worst thing he could see, worse than any of the past crimes he thought didn't matter because he wasn't killing anymore. He always defined himself by love, and the fact that he could hurt, violate the woman he loved pushed him over the edge. It made him want to change, at least in my view. I know I might get bombarded with "He just wanted Buffy back" (a very Angel sentiment, if I may) but I don't believe it.
As for Spuffy, like WA said, Buffy forgave him. She realized that, although the demon was still there, so was a new, completely different part of Spike. How she reconciles the two, I don't know. I have trouble doing it and he's not even real.