I'm pretty sure he talks about it during the interview bits for the Bedtime Stories interview disc (in the MP3 section)...and he also mentions it in the Rolling Stone article - here is the blurb from the RS article -

Baerwald takes another sip of beer and begins to explain that one of the harder-hitting songs on Bedtime Stories, "Dance," was written coming off the experience he had shared with Ricketts in the music industry. "I adapted 'Dance,' " he says, "from a Paul Bowles short story about a naive language student who goes to Morocco to find a tribe that speaks this dialogue he's studying. He goes to the chieftain and says, 'I am a seeker of knowledge.' And the chieftain says, 'Oh, are you?' And the tribe grabs the student, and they tear his clothes off, and they castrate him and blind him and cut his tongue out. They feed him hallucinogenic drugs, and they pierce his flesh with needles and dangle bells from him. And they make him dance for their entertainment."