My suggestion would be to lose weight anyways

because being overweight is just not healthy, period... When is your prom, in April or May? Depending on the amount of weight you lose, the dress could just look looser and not so snug on Prom night... You could still lose some weight and have the dress taken in just before prom night?... Just my thoughts

....
As for toning your arms or anywhere else for that matter, you cannot spot reduce... You need to lose the fat on top of the muscle before the muscle shows through in order for your arms to look "toned"...
Could we see a pic of you in your dress? I love pics and prom dresses... DD is going to a prom, I think, not her's, but a good friend who has asked her already,
I'M excited!!
I hope this helps, keep us posted on your progress too...