Run an awesome Midway booth
See Activities Midway.
Recruit vigorously by word of mouth
One thing that I (Alex) did for this (Spring 2012) class was, during the fall and until the class started, when I ran into somebody I knew who seemed possibly interested into Squares, I would encourage them to try it out, and then write down their name. Before the Fun Night and the class I emailed the people I'd written down a couple of times encouraging them to come, mentioning they'd expressed interest before and when. This seemed to work pretty well at getting people to come. (Somewhat key to this, I think, was actually keeping track of people who seemed interested and sending them personalized emails, including ~"I talked to you a couple months ago, and you said you might be interested in Squares. On Tuesday we'll be ...")
We might want to systematize this by, e.g., trying to poke most of the active MIT students every couple months, and encouraging them to keep track of people who have seemed interested. When we have an event coming up, poke them again to email the people they've recorded. (This, uh, may run afoul of the "we don't have many active students" problem, though maybe this class will alleviate that issue a bit.)
Keep poking people who seem to be drifting away
This semester, Laura kept having me (Alex), at least, poke people who had been absent for a week or two to encourage them to come back. This seemed to work decently well at getting people to stick around, though it probably helped a lot that I knew the people I was poking. Also...
Run make-up sessions
One thing that helped keep people in the class despite missing class for several weeks in a row was running make-up sessions (with varying degrees of formality) to review material from the last couple weeks. Consider anchoring on a couple class members somebody knows well (scheduling around them, planning to emphasize the material they're missing), and then inviting others in the class to join and angel and/or learn the material. If accurate, emphasize that coming may be helpful but isn't necessary, so that hosed folks don't feel like they need to drop out if they can't make it.
Run an IAP make-up session
People seem to drop out of Squares after the PE class ends. Run a one-day make-up session that covers (in an afternoon and early evening) the content from the end of the PE class up until the end of plus, to get those people into the club and hopefully continuing to dance.
Don't set a minimum attendance requirement:
We've seen this semester that that people can succeed with remarkably low attendance rates. Presumably part of why they kept coming back was that Cally (I gather) somewhat ~played down the importance of making everything, and tried to encourage folks to keep coming?