Seating arrangements

I think you may be overthinking it a bit.

The way I decided who to place where is based entirely on who we feel closest to and who was a guess of which parent (they paid, they got a say). For example, my close friends are sitting closest to our sweetheart table on one side and his close friends are sitting on the other side, with our parents tables in the front row surrounding the dance floor and their friends behind /around them.

TLDR: surround yourself with the most important people to you and don't worry how the tables will look once the dancing begins

Hmm, that's an interesting question.

I will start by saying that it didn't matter so much to us about the dance floor since here in Australia, there's been on and off restrictions on weddings where only 20 people from the bridal party can dance at all, and a list with their names must be provided in advance. They wear a wrist band.

So making the seating chart based on me trying to determine how they might or might not behave on the night didn't make sense.

Where in this layout will you be seated? I think this would help determine an answer for me...

For eg, we have big long tables in an E shape, with the bridal table along the back of the E, and the dance floor to to the right of the E, so the people on the ends of the tables and closest to the dance floor are the ones that are farthest from us. I didn't think about whether they would be sitting and observing the dance floor, we chose their seating based on how distant their connection to us was.

I completely agree with this!

Oh my goodness, how awkward for all involved that only some people get to dance!

Legit. At that time, you were also not able to stand and chat with a beverage (our famous 'vertical drinking' restrictions!) - you must sit. You could switch tables with another person, but the majority must be seated at all times, with the exception of the 20. The two weddings I went to with these restrictions in place, I was related to the bride and groom either by blood or by marriage, so I was one of the lucky 20. As you can imagine though, there's a level of obligation to dance the whole time! Much of it depended on the severity of the venue too, who risk major fines if they don't properly police the restrictions.

We are hoping these restrictions are relaxed for our wedding in Feb, but we'll have been engaged for 2 years at that point and neither of us really want to wait any longer just for dancing.