A search brought up this thread from boards.ie
http://www.boards.ie/vbulletin/showthread.php?p=66664199
The information in the thread appears to suggest that the sender does not sign the postal order, just completes the payee name and where it should be cashed.
It sounds as if the postal order has become separated from your details, so they've got the money but haven't marked it against your records. If you check with An Post, they may be able to tell you if the order has been cashed (which is slightly different than the council acknowledging that they received your registered letter).