Without asking for a crazy change like "half ranged damage and lock units into melee" (which is completely unreasonable and would change the game totally), I'd like to say dancing should be reduced a bit. - my suggestion is temporarily locking units into melee, for at least a certain amount of DMG or time. (depending on the attacker, 1-3 hits or 2-4 seconds).
As I get better at DoW (been playing for about 4 months) dancing seems more and more ridiculous, and melee units more and more useless.
EDIT: people have already said dancing units are a wasted unit, as they cant fire back normally, but, if 2 squads are being used, dancing is still just potent, as the stationary squad can still fire.
I'm not saying dancing should be stopped, just that dancers should be forced to take some melee DMG...