Question

I think this was just an imaginary projection of Damon's character's emotions as the phone conversation unfolds. Watch the man's expression slowly go to a smile, then the dancing as Penelope agrees to see Damon.

That's my wife's theory - I was stumped to, but this explanation seems good to me...!

The dancing Mexican is EXACTLY a projection of Cole's emotions. Remember the scene at the beginning of the film where Cole's father tells him not to cry? Cole has never been allowed to show emotion, becuase, in the eyes of his father, that's a sign of weakness. So it stands to reason that Cole wouldn't show how excited he is to hear his girl tell him she will see him one last time. That excitement HAS to come out somehow, because it's too big for Cole's machismo to contain.