That's Kate Pierson from the B-52s. If you've never reacted to B-52s, you really should. They're a trip. I'd do Rock Lobster, though many people would tell you to do Love Shack.
Background isnt that happy. They made it as sarcasm. "Shiny happy people holding hands" Chinese propaganda poster when people were killed. R.E.M also hated this song because it wasnt understood.
No. They just made the song for kids. They actually liked the song. I've seen interviews with Stipe and its nothing to do with that propaganda. It's just a happy song. Inspired from his love of the Monkees as a kid.