I have two three striped damselfish, bought as a pair, that also do this. It's their aggressive dance. I think the domino are similar.
As you have one already in a small tank I'd advise against getting him a "friend" damsel. That will probably end in disaster.
The upside of these fish is that for salt water they are tough, and they are active so won't hide under your rocks all day.
One possibility is to pair with a big bruiser of an anemone fish, what my two damsels live with (tomato). He's definitely the boss, so if they get too dancy and challenging he'll chase them off. However unlike another damsel he'll just chase them off and won't hunt them to death. My tank with those three in is 22G (90 liter). Would be hard to find any other fish that I could introduce now, but these are active enough and I'm happy with that.
If you find something that you can add, suggest 1. sooner than later 2. Move the rock work / territory around before addition 3. If you cab have the tank with egg crate for a couple of days so the new addition can deal with the damsel settled in / with it's bearing. A mirror can also ensure the damsel spends 50% of his time worrying about "the other damsel" and not the new tank mate.
