Where I grew up and where I live now (two entirely different parts of the country) graduation is a big deal. Most of the big deal is that it simply a milestone and a shifting of life stages. So, I would definitely do something significant, although I wouldn't go quite all-out.
If it were me I would definitely do a picture of some sort, even if not formal senior portraits. It's always nice to have a picture to look back at and say, this is what I looked like when I graduated from high school.
I would also allow my DD to go to the dance. I don't think too much trouble happens at the actual school-sponsored event; anything crazy, I think, would happen before or after, which can be avoided.
I like the idea of something more permanent to mark the occasion as well, either to commemorate the high school years (like a class ring or charm bracelet) or to look towards her next step of college (computer, a nice suitcase, etc.). As far as rings go, my DS in 10th grade just got his and is really excited about it, but only about 1/3 of his class got class rings. So, this would really be a matter of your DD's personal tastes. I do like the idea of a ring to wear on a chain since you anticipate her hands might grow more and it is kinda cool in a LOR way, but you can always get rings resized in the future as well. I love the charm bracelet idea because your could incorporate all your DD's more unique activities, but I know from experience that can get pricy, too.
Here, apparently individual graduation parties for everybody are the norm (I didn't grow up with that tradition), with an open house format and food and a card box, but my introverted DS15 has expressed for years that he absolutely wants no part in this. What we are doing instead is a family vacation after graduation to a destination of his choosing (within reason, of course), which gives all of us a chance to spend more time together before the next stage of life begins, gives him a chance to see more of the world, and is a celebration unto itself.
