RK,
Your instincts are correct. By the way, does "offered to be in her show" mean that she wants to pay YOU to perform? My guess is no. I'm guessing that you get to be in the show by paying a fee and by purchasing lessons so you can rehearse.
Don't feel bad, I have yet to hear a story from a new ballroom dancer where their teacher/visiting coach told them they were average and there was no need to buy anything else. It's the nature of the market.
There is plenty of good in the ballroom world, just remember that you are purchasing a service, and use your best judgment in determining whether you are getting a good value for your money.
Good luck, and welcome to the world of ballroom dance!
Lem