"all the little angels rise up" is the first line to some sort of old
war song in the Terry Prachett Novel Night Watch.  What is the real
life refferent and its significance?

Thanks for using Google answers. The song that you are referring to is
based on the german folk song "Ach De Lieber Augustine" and is
attributed to Saint Augustine. According to the web site of Frank
Petersohn,
 "This song originated in Vienna during the Plague period of
1768-1769. Legend has it that one evening, Augustin hoisted one too
many and decided on a nap half way home. The morning corpse patrol
threw his body on the cart with the other corpes and took him away.
Fortunately Augustin awoke in the nick of time, to the horror of the
mortician. In no time at all, the rumor spread far and wide that wine
was not only cure but also a great prophylactic for the plague."

The melody is so basic that many lyrics use it as the base
melody.There several version of the song that include the phrase you
quote. The most complete one I could find is:

All The Little Angels

All the little angels rise up, rise up,
All the little angels rise up high.

How do they rise up, rise up, rise up?
How do they rise up, rise up high?

They rise /heads/ up, /heads/ up, /heads/ up,
They rise /heads/ up, heads up high.

All the little angels rise up, rise up,
All the little angels rise up high.

How do they rise up, rise up, rise up?
How do they rise up, rise up high?

They rise /knees/ up, /knees/ up, /knees/ up,
They rise /knees/ up, knees up high.

All the little angels rise up, rise up,
All the little angels rise up high.

How do they rise up, rise up, rise up?
How do they rise up, rise up high?

They rise /ARSE/ up, /arse/ up, /arse/ up,
They rise /arse/ up, arseup high.

See how they rise up, rise up, rise up,
See how they rise up, rise up high. 

All the little angels ascend up to Heaven
All the little angels ascend up on high
Which end up?
Ascend up
Which end up?
Ascend up
All the little angels ascend up on high

I think if you listened to the melody and song you would recognize it
in many tunes you hear.

I do not think there is any significance to the phrase in the book. I
have searched numerous groups and discussions of the song and no one
seems to have commented on it. However, during the war many songs were
adapted to the melody because it was so simple. The British were
particularly adept at this. The original lyrics seem to have a very
melancholy tone of despair at the shape of the world and its morals.
It could be applied to the novel.

Web Sites

For the lyrics and melodie of the original.
http://ingeb.org/Lieder/achdulie.html
or http://ingeb.org/

For lyrics and discussions about Terry Prachett.
alt.books.prachett (Google Groups).

I haven't been able to find the complete lyrics online. You might be
interested in this discussion of the song, with partial lyrics and a
mention of Terry Pratchett:

http://shorty.mudcat.org/thread.cfm?threadid=43673#638999

I spent a good hour or so looking and pinkfreud's link is the only
reference I could find on the internet as well...

All the variations of that song in the thread have "little angels" in
common. They also have a phrase that is "... little angels [verb] ..."
The verb is rise/ascend/climb or any angelic rising word. I tried
variations on these and found nothing. Also the word "high" seems to
be common to the variations. This is a tough one but an interesting
one. If I find anything more I'll be sure to let you know... but for
now someone else may be able to find it.