You're going with a gay guy while you are straight, i can respect that a lot. Definitely let him know you are not gay. I've never been in your exact situation but just have fun like you were going with a bro.
On a side note i had a friend who lost a bet and had to go to our LGBT prom, i was hanging out with him and we weren't doing much so i went. I'm not very good at dancing but who cares and i was having fun when this very flamboyant kid (nothing wrong with that) starts dancing next to me, sees I'm not very good at dancing and tells me i "Just need to feel the rhythm going up my ass" multiple times. I did not want to have anything go up my ass, and so i was done dancing.
TL;DR: Go, let him know your not gay, have fun. Second paragraph is a funny story.