My villagers seem to choose two places to "Secretly Practice Dancing". One is by the alchemy lab (where the kids go to answer a call of nature) and the other is by the waterfalls. Neither location is very "secret" - half my villager seems to go there at every opportunity to wash their face, bathe, or have a drink. As to practising dancing where the kids go - eew! They'd better be careful where they're treading!