Spike has a soul and chose it a bit more actively in this story version--like, they needed a souled vampire to stop apocalypse #23,049 and Angel was down for the count, so Spike took a deep breath and stepped up. Later the chip comes out. He and Xander set out on a quest through a portal and are gone seven years. They start off chafing and hating each other, but of course end up together, then around year three Xander has to make a deal with a witch--to save the life of some stray innocent--and he doesn't stop and think about the consequences because the situation is urgent. Afterwards, the witch wants payment of his soul, but Spike won't let that happen, so he knocks Xander out and gives up his own. But Spike doesn't just switch off and turn back into Spike 1.0, Evil Version for Windows. He remembers who he was with the soul and he's lovelorn; he expects Xander to hate him now that his soul is gone--he assumed that'd be how it played out and gave up his soul anyway. Xander doesn't react as he fears, though; he tells Spike he loves him more than ever and that it will be okay. He says that he's got Spike covered: you're mine, he says. Xander will be his liege, his soul and conscience encompassing Spike, giving Spike an authority he can turn to for guidance. He says they should set some ground rules. Spike is relieved that he trust Xander to catch him if he starts to fall, and the rules help remind him what not to do now that things are less morally instinctive--like, no killing except in self-defense or to protect those more innocent from harm; no feeding off people, etc.
Spike's conflicted, his head telling him one thing, gut telling him another. He's always torn, and it wears on him, like an overall soreness and weariness. He's trying hard but one day he slips up and, after having to kill someone in a fight, feeds off him in the heat of the moment. Xander is anguished and once Spike gets how upset he is, it starts to sink in--a cold pit of fear settling in his gut at having disappointed Xander. Xander is afraid too because something like this could be the first step in a slippery downhill slope for Spike, and fear makes him harsh. He says this can't happen, says that Spike can't just feed off people like an animal. He tells Spike not to talk again until Xander tells him he can. They're both miserable, riding in silence for a few days until Xander starts talking to Spike again, comforting him, pulling him close at night, reassuring him that he still loves him. But he doesn't let Spike talk for almost a month, because it's serious, and they're sad, but Xander comes around and gives Spike his trust again and Spike never fucks up badly after that.
So they go home, rejoining the gang, fighting evil, and it gets more difficult for Spike, being around the others who've seen him in all his incarnations, who have a hard time adjusting. Buffy gives him the most flack, even though Xander's told them all to help Spike keep on the straight and narrow, and one day Spike say something that gets under her skin and she hits him, hard enough to hurt him, hard enough to make him hit back, and then he has to go to Xander and confess his sin. Xander is deeply angry at Buffy because Spike expects some kind of discipline and he has to give it, it's what he needs, but he tells her off in a tight voice, tells her it's wrong to lash out at Spike in a way she'd never do with the rest of them just because he looks at her sideways or says something she doesn't like, when he's trying so hard to stay good, something amazing that no unsouled vampire has ever done. He tells her that she might as well be challenging an alcoholic to do body shots. It's not right.
Another time, Giles comes back from a trip, an Indiana-Jones style artifact hunt around the world, and brings everyone gifts, all special in some way: an ancient cross necklace for Buffy, a prehistorical goddess icon for Willow, an old edition of Celtic poems for Angel, an antique herb box for Tara, etc. And he gives Spike a gift--Spike doesn't even expect one, is surprised, and pleased, and opens it, and it's this gleaming new knife in a polished box, with a sheathe, and he feels an aching shock, a flash of insight and self-hatred of how different and out of place he is--everyone else has been given personal items that have been touched and cherished, absorbing over time a kind of human, spiritual essence from the people who'd held them, and he's been given this new knife: this thing that's never been touched or cherished by anyone, a cold hard thing meant for hurting and killing.
He isn't aware that he's gone still, his expression emptying, and Giles doesn't notice at first, he's rambling on with the backstory for the gift as he did with the others: how he remembered Spike's favorite knife had been broken in a fight and he hadn't been happy with its replacements, how Giles had seen this one in a shop in Kenya, incredibly expensive but he'd bartered for it, and on and on, and eventually as he's talking he sees how quiet Spike has become, his eyes downcast, and Giles clumsily tries to feel out whether Spike isn't happy with the gift, as everyone sits there, sad or uncomfortable, having instinctively sensed the faux pas, and every awkward thing Giles says just highlights the painful difference until he finally hears his own words and it dawns on him how cruel the gift really is, thoughtless instead of thoughtful. And Spike manfully comes up with very sincere-sounding thank-yous, but later goes off and hides and cuts himself all over with the knife with a desperate rage of self-loathing, ending up curled on the floor, bloodied and broken up with those pitiful hitching sobs that come when you're at your lowest.
Then Xander comes and wraps him in love until he's better. The end.