You have to conquer all the Harem Girls in that location first, then it should give you the option. Once Dancing is unlocked, the Money it earns can be spent on Items or Building Upgrades.
Hypnotize them and level them up to a certain point. Lv100 should be enough. Building Upgrades are reset when you reset your Girls for Pearls, but the amount of money that your Dancer is earning is not reset until you try to change who is dancing. Dancers earn money based on their own Talent, and Campus Loyalty.