I know he would never actually do anything but still just doesn't sit well with me
Oh dear. What makes you think this, given that his behaviour points to the contrary? Sorry, but he absolutely would take things further if he had the chance. He's doing such shitty things in front of your face, so what he would do behind your back, is anyone's guess. And in my view, any man who tells another woman, that he wants to dry hump her, on a dance floor, where the dry humping will be seen by all and sundry including his own wife, is not going to think twice about really doing the deed, if they were alone in a room.
My first husband was exactly like this. I endured it for years and years. And yes, in the end I found out that he indeed would take it further given the chance. He fucked my best mate, so that was nice.
My mistake was always making excuses for his behaviour, and accepting apologies. I often "played it down". He was always drunk when it happened, so it was always written off to silly drunken antics, and he was always sorry. I should have kicked him out. At the very least, he may have understood the severity of it, and changed his behaviour. Maybe then, our relationship would have stood a greater chance. As it is, I always forgave, and therefore he thought it couldn't be that bad, and so, he always did it again. Until I could take it no longer, and I left him (after 20 years).
My advice, if you want to stay with him, is to treat this as the very bad thing that it is. I'd make him leave. Even if your own head, you know you will get past this, don't let him know that. Make him see how serious you are, and how he is risking your relationship. If I could have done one thing differently, this would be it. By forgiving and forgetting this, you are giving him the message, that what he has done isn't that bad. This gives him the green light, to do it again and again.
And it IS bad. How would he feel, if you asked one of his friends to rub his dick all over your dress. On a dancefloor. In front of crowds of people? Hunky dory?