In regards to that last question
I think the brothel was something Baby made up in her mind to make her horrible situation more bearable. She replaced the ugly with pretty. She's trying to escape the world she's in. Her "dance" is described as gyrating, which is what would happen to a patient in shock therapy, which they mention giving her repeatedly. On those occasions, she slips deeper into her mind to escape. Though she does this knowingly to escape the troubles she was trying to avoid that start surfacing in her made up world.
In the end, she is safe in her mind, in her slightly better world, unaware of her actual fate. But aware that she helped someone, so she's happier.