How do I fix-Update

I am relatively new to sewing. I can sew the basics and am learning with each new piece I do, but I am not sure how to fix this dress. It is a vintage dress I bought on e-bay last year. I appears to have been hand-made as there are no tags. It has a wonderful wind flap or hanging yoke in the back (I'd photograph it for you but I still have it on from taking the photo of the arm).

My lovely daughter wore it to a wedding and with a little too much dancing and her beautiful and strong bicep it tore. She did the same thing to a vintage dress she wore to my 50th birthday party. Same place, from same bicep.

Would I just tuck it all in and hand sew with an overcast? Or should I buy some of that iron on stuff and try to mend it that way. I love this dress and the cute red, white and blue one as well....note to self...Molly needs to wear her own clothes when she is dancing.

Update: Thanks so much for all the wonderful comments on how to fix this. I have been wearing it all day...it is very comfortable with a huge circle skirt. Now that I think of it I also tore the chiffon on the shoulder seam of this dress. I promise I did not dance in it.....it was just very old and tender. So maybe a trip to the seamstress is in order...she fixed the bust on this before I wore it to my party and warned me it was about to blow.  I also blogged yesterday and today about all the gloves...for any of you interested in vintage gloves.