I've given a lot of thought to obituary dances recently, as we've had so many...Kim, Christine, now Tony...and, well, we're a graying community (though Christine proved you don't have to be to leave this earth). Many of us have danced a silent contra in memory at dance camps with a certain caller.
I think what you do really depends on both who is in the room and who died.
For example, Kim Yerton was well known to me and I played a lot of Bear music at Orlando dances. Our dance started just two years ago and used recorded music for most of its first year, until we got some sponsors. However, nearly everyone at the dance was new and learned to dance in our community, post-pandemic. Only perhaps three people had ever met Kim, including me. When I put on a Bear tune in her memory, the main effect was that people came to me afterward and offered condolences for my lost friend. Not the effect I had hoped to have. I wanted to honor Kim, not get sympathy.
But, a local dance angel died last year, Al Rogers. As part of his last wishes, he encouraged people to contribute to local dances in lieu of flowers, and many performers did one or more gigs for free. When someone said they were calling for free in honor of Al, the dancers really appreciated it, even though, again, most had never met him. So, that made a much bigger impression. And, more importantly, it was a positive, happy vibe, which is tough to achieve in a memorial situation. And, we knew it was what Al wanted, because he told us.
Another concern is, if a prominent local or national figure passes and gets remembered, and then someone of perhaps lesser stature passes, you have the possibility of offending some if they are not recognized, or even if they are and the community response isn't as deep.
Claire already mentioned the worry of people dropping out or breaking down.
And finally, in most cases, people are at a dance for joy, an upbeat time. If they are not feeling personally down about the death, perhaps because they don't know the person, then being brought down or having everyone around them brought down is not what they came for.
I don't have a single recipe, but I lean toward minimal recognition at the mic, only of people really important to the dancers present, real elephant-in-the-room situations. Warn ahead, as was mentioned. Otherwise, a sign and flowers or a photo on a table or someplace visible but not obtrusive should work for most, and allows people to manage their own emotional state in their own way and not on the dance floor. It can even be pointed out from the mic (before the break, please, not before a dance). It gives recognition and allows for personal grief without breaking the happy vibe of the whole dance.
--jh--