Mrrzy, as a kid, I learned it "L'on y danse" and "tout",not "tous" en rond. I could be way off on this, but I have the impression that the way I learned it is the Canadian way. Our French is a bit different from our European cousins.
Alphonse Daudet wrote it: "Il faut qu'il danse," which I think plays heck with the meter. But Daudet actually lived there, so maybe this is the indigenous way.
And I know of no standard dance to the tune.