There is quite a lively dance scene in and around Kiel, centering on musicians and callers who keep it going. You'll find similar situations in other places. But Leipzig is a special case. It was there the big 'dance-houses' were organised when the GDR still existed, and they're still going strong, with a festival each year. Google their website: Leipziger Tanzhausfest.

Anyway, there is a lot more info on the German folk scene in these threads: German folk music and German folk music II