Place this script on the NPCs OnPerception.
I've simply added a few lines to the default nw_c2_default2 perception script that will cause the NPC to start dancing as soon as a PC is seen.

Note: Dancing does only work for NPC appearances who have the custom animations, those I know of that it does work on are: all regular playable races (human, elf, half elf, halfling.. so forth) and the githyanki.

Code:

//::////////////////////////////////////////////////// //:: NW_C2_DEFAULT2 /*   Default OnPerception event handler for NPCs.   Handles behavior when perceiving a creature for the   first time.  */ //::////////////////////////////////////////////////// // ChazM - 4/21/05 modified so NPC's can stay focused // ChazM 1/6/06 removed call to WalkWayPoints() // ChazM 3/6/06 Added exit condition if object is script hidden // Hellcow 14/01/07 default script modified to make NPCs dance when a PC is perceived. #include "nw_i0_generic" #include "ginc_behavior" void main() {     // * if not runnning normal or better Ai then exit for performance reasons     if (GetAILevel() == AI_LEVEL_VERY_LOW)       return;    // script hidden object shouldn't react (for cases where AI not turned off)    if (GetScriptHidden(OBJECT_SELF))       return;     int iFocused = GetIsFocused();     object oPercep = GetLastPerceived();     int bSeen = GetLastPerceptionSeen();     int bHeard = GetLastPerceptionHeard();    if (iFocused <= FOCUSED_STANDARD)    {        if (bHeard == FALSE)        {            // Has someone vanished in front of me?            bHeard = GetLastPerceptionVanished();        }            // This will cause the NPC to speak their one-liner        // conversation on perception even if they are already        // in combat.        if(GetSpawnInCondition(NW_FLAG_SPECIAL_COMBAT_CONVERSATION)           && GetIsPC(oPercep)           && bSeen)        {            SpeakOneLinerConversation();        }            // March 5 2003 Brent        // Had to add this section back in, since  modifications were not taking this specific        // example into account -- it made invisibility basically useless.        //If the last perception event was hearing based or if someone vanished then go to search mode        if (GetLastPerceptionVanished() && GetIsEnemy(GetLastPerceived()) )        {            object oGone = GetLastPerceived();            if((GetAttemptedAttackTarget() == GetLastPerceived() ||               GetAttemptedSpellTarget() == GetLastPerceived() ||               GetAttackTarget() == GetLastPerceived()) && GetArea(GetLastPerceived()) != GetArea(OBJECT_SELF))            {               ClearAllActions();               DetermineCombatRound();            }        }            // This section has been heavily revised while keeping the        // pre-existing behavior:        // - If we're in combat, keep fighting.        // - If not and we've perceived an enemy, start to fight.        //   Even if the perception event was a 'vanish', that's        //   still what we do anyway, since that will keep us        //   fighting any visible targets.        // - If we're not in combat and haven't perceived an enemy,        //   see if the perception target is a PC and if we should        //   speak our attention-getting one-liner.        if (GetIsInCombat(OBJECT_SELF))        {            // don't do anything else, we're busy            //MyPrintString("GetIsFighting: TRUE");            }        // * BK FEB 2003 Only fight if you can see them. DO NOT RELY ON HEARING FOR ENEMY DETECTION        else if (GetIsEnemy(oPercep) && bSeen)        { // SpawnScriptDebugger();            //MyPrintString("GetIsEnemy: TRUE");            // We spotted an enemy and we're not already fighting            if(!GetHasEffect(EFFECT_TYPE_SLEEP)) {                if(GetBehaviorState(NW_FLAG_BEHAVIOR_SPECIAL))                {                    //MyPrintString("DetermineSpecialBehavior");                    DetermineSpecialBehavior();                } else                {                    //MyPrintString("DetermineCombatRound");                    SetFacingPoint(GetPosition(oPercep));                    SpeakString("NW_I_WAS_ATTACKED", TALKVOLUME_SILENT_TALK);                    DetermineCombatRound();                }            }        }        else        {            if (bSeen)            {                //MyPrintString("GetLastPerceptionSeen: TRUE");                if(GetBehaviorState(NW_FLAG_BEHAVIOR_SPECIAL)) {                    DetermineSpecialBehavior();                } else if (GetSpawnInCondition(NW_FLAG_SPECIAL_CONVERSATION)                           && GetIsPC(oPercep))                {                    // The NPC will speak their one-liner conversation                    // This should probably be:                    // SpeakOneLinerConversation(oPercep);                    // instead, but leaving it as is for now.                    ActionStartConversation(OBJECT_SELF);                }            }            else            // * July 14 2003: Some minor reactions based on invisible creatures being nearby            if (bHeard && GetIsEnemy(oPercep))            {               // SpeakString("vanished");                // * don't want creatures wandering too far after noises                if (GetDistanceToObject(oPercep) <= 7.0)                {    //                if (GetHasSpell(SPELL_TRUE_SEEING) == TRUE)                    if (GetHasSpell(SPELL_TRUE_SEEING))                    {                        ActionCastSpellAtObject(SPELL_TRUE_SEEING, OBJECT_SELF);                    }                    else    //                if (GetHasSpell(SPELL_SEE_INVISIBILITY) == TRUE)                    if (GetHasSpell(SPELL_SEE_INVISIBILITY))                    {                        ActionCastSpellAtObject(SPELL_SEE_INVISIBILITY, OBJECT_SELF);                    }                    else    //                if (GetHasSpell(SPELL_INVISIBILITY_PURGE) == TRUE)                    if (GetHasSpell(SPELL_INVISIBILITY_PURGE))                    {                        ActionCastSpellAtObject(SPELL_INVISIBILITY_PURGE, OBJECT_SELF);                    }                    else                    {                        ActionPlayAnimation(ANIMATION_FIREFORGET_HEAD_TURN_LEFT, 0.5);                        ActionPlayAnimation(ANIMATION_FIREFORGET_HEAD_TURN_RIGHT, 0.5);                        ActionPlayAnimation(ANIMATION_FIREFORGET_PAUSE_SCRATCH_HEAD, 0.5);                    }                }            }                // activate ambient animations or walk waypoints if appropriate           if (!IsInConversation(OBJECT_SELF)) {                  //if (GetIsPostOrWalking()) {                  //   WalkWayPoints(TRUE, "perception");                  //} else             if (GetIsPC(oPercep) &&                   (GetSpawnInCondition(NW_FLAG_AMBIENT_ANIMATIONS)                    || GetSpawnInCondition(NW_FLAG_AMBIENT_ANIMATIONS_AVIAN)                    || GetSpawnInCondition(NW_FLAG_IMMOBILE_AMBIENT_ANIMATIONS)                    || GetIsEncounterCreature()))               {                    SetAnimationCondition(NW_ANIM_FLAG_IS_ACTIVE);               }            }        }    } // end if focused         // Send the user-defined event if appropriate     if(GetSpawnInCondition(NW_FLAG_PERCIEVE_EVENT) && GetLastPerceptionSeen())     {         SignalEvent(OBJECT_SELF, EventUserDefined(EVENT_PERCEIVE));     }    //Dance Code begins here       object oDancer = OBJECT_SELF;    //FloatingTextStringOnCreature("Script Running", oPC);    if (GetIsObjectValid(oDancer))    PlayCustomAnimation(oDancer, "dance02", 1, 1.0); }

Basicly the dancing code is only the few last lines above.