We did some Googling and determined that the film was the 1984 Cynthia Dale vehicle Heavenly Bodies, and IMDb told us that our deduction about the plot was, in fact, dead-on.
A small "Dance-ercize" studio fights for its existence against the unscrupulous owner of a rival club. The conflict boils down to a "Dance Marathon" to settle the score.YouTube didn't exist back then, and I realize how old that makes me sound, even as I'm making fun how heinously dated Heavenly Bodies looked. But as a result of the primitive internet of 2002, we couldn't immediately watch it. Now, about ten years later, I happened across the trailer on YouTube. It's exactly as I remember it. Please enjoy.
And the neat thing is that you don't have to watch the film yourself, since the trailers basically give you all the lycra and jazzercise that you'd need to get what the film's about, and besides, I already spoiled the ending for you.