Congratulations! To me this seems like very good news (assuming this is a solid agent you'd be happy to work with.)
"Dance" is a very good word for this initial process--kind of like a courtship ritual! But what I like about this agent's letter is that he/she is not simply expressing cautious interest in a new writer and saying "show me more" but is being upfront about the difficulties in this particicular genre and the need to develop a clearer focus.
Also note that he/she has not done what other agents might: dismiss a book that might have an uphill climb and not be a big moneymaker, or tell you to resubmit once you are nearer completion or have made changes.
As for what "seeing more" means, I think you will just have to ask. I had a similar experience, by the way, with my agent, who wanted to see more after the proposal, before making a decision. Since my book (a version of it, anyway) was close to done, I was able to send the first hundred pages.
Seems like your agent is wanting to work with you to help develop the book. The question may be how much of this is a trial run before representation is offered, how much comes after.
Keep us posted!
Susan