Yep, that's New York Dolls on Murray near Ground Zero. Your tale is a perfect example of what that place was like in the mid-90s, before 60-40 took its toll. I had a friend there who was a bartender in those days, so I rarely went into the main room with the lap-dancing and just stayed at the bar. The rip-off vibe at NY Dolls was never as intense as it still is at Scores, Flashdancers, VIP, Hustler, etc.. I despise those places. NY Dolls was damn close at times, however.
The Harmony and its neighbor the Baby Doll Lounge are long gone. The Harmony could be insane at times, with the covert handjobs and whatnot. That place was too freaky and intense for me. I liked the Baby Doll a lot more. It too could be a real horror show. There was a psycho who used to force himself to vomit into a glass, which he'd then slam back like a shot while the bartenders shreiked. He was always smiling when he was dragged out and thrown into the street. The bouncers would forget his face and then he'd come back for another go-round a few months later. There was also a guy who used to lick the dancers' shoes and suck their toes at the end of the horseshoe stage. It was much crazier in a sick, sick way than people imagine the (post-live sex show) Times Square places to be.
BTW, the Baby Doll Lounge was the ACTUAL location of the famed "Headless Body Found in Topless Bar" NY Post headline. Serial prosty killer Joel Rifkin was also a regular.