Circle dance goes around in a circle (4)
I believe the answer is:
hoop
'a circle' is the definition.
(I've seen this before)
'circle dance goes around' is the wordplay.
'circle' becomes 'o'.
'dance' becomes 'hop' (hop is a kind of dance).
'goes around' is an insertion indicator.
'o' put into 'hop' is 'HOOP'.
'in' is the link.
(Other definitions for hoop that I've seen before include "Circlet" , "children's toy" , "Croquet target" , "Circular band, in basketball, say" , "Rigid circular band" .)