The movie's Wikipedia entry says this regarding her casting:
Three candidates, Jennifer Beals, Demi Moore, and Leslie Wing, were the finalists for the role of Alex Owens. Two different stories exist regarding how Beals was chosen. One states that then-Paramount president Michael Eisner asked women secretaries at the studio to select their favorite after viewing screen tests. The other: the film's scriptwriter Joe Eszterhas claims that Eisner asked "two hundred of the most macho men on the [Paramount] lot, Teamsters and gaffers and grips ... 'I want to know which of these three young women you’d most want to f---'".
Most likely the makers of the movie didn't mind her lack of dancing capabilities, figuring they could "solve" this by using stand-ins. Most important were her looks and (to a lesser degree) her acting capabilities.