Destiny, I think, because, although the sentence is written in the past, it implies that their futures will be linked. Both of their futures will depend on each other somehow. Fate is already occuring, in the present, as I understand it. It must be fate that we met here. Destiny is the future. We are destined to end up that way.

"Sweet!" is nothing but a metaphor to express a positive feeling. There is nothing truly sweet in life.

"Life is fated." This is a fundamental proposition of the tragic view of life. On a daily basis, we tend to think superficially. There is nothing wrong with it. When I referred to "good" or "bad" a moment ago, I assume that's expressed under a priori consciouness. Fate VS Destiny = The Tragic VS The Spirit

I'm not entirely sure why you ask these questions if you have already taken a very specific, immovable stance on what the correct answer is, Ootred? I can only talk from my experience, and those around me, on the specific usage. However, in my experience - as a native speaker using the language on a daily basis - I would say they are often used for both bad and good. If I randomly met an old friend in a motorway service station, after losing his contact details, I may well say "it must be fate that we met like this". It's a good thing. If I had tried hard at something, but it just wasn't working, I may well say "I feel like I was just destined to fail". It's not a good thing. This is my experience and other native speakers may see it differently. But, if you are looking for clarification from people about how English is used natively, this is my experience of it. If you want a specific definition, the dictionary will provide that. I feel like usually people ask questions here to better understand why the way a word or phrase is used doesn't make sense for them, based on the definitions they have seen in a dictionary? For example, the dictionary will give you many definitions of 'sweet', but it probably doesn't contain a common English use of "Sweet!" Meaning that's cool, or I agree. It's used constantly though.

Our instinct has a tendency to distingiush what is good and bad by first impressions. In descriptive sense, some people might use them interchangeably, and that's a fact since not everyone would think theoretically about using words. But in prescriptive sense, I think we have a good reason to accept the distinction of them I mentioned.