It's definitely a big turn on. I'm not sure about that whole grinding thing, but chicks LOVE dudes that can dance the tango, waltz, swing, salsa etc.
I was at a party a theme party a few weeks ago. They were playing a lot of tango at the beginning. I had a friend teach me the moves before the party. Well, sure enough, chicks were just lining up to dance. I was dancing with one girl and another girl would come up and tell her that it was her turn.
But yeah you don't want to appear so into dancing as to appear gay. It should be another one of the little tricks you have in your repetoire. I think it's most interesting when you spring it on her unexpectedly.