A source said: 'There's no charge in the disciplinary manuals for silly walks and dancing on parade because nobody in living memory has had the cheek to do it.
'But this guardsman's senior officers were livid when they saw the footage. His conduct is contrary to everything being a guardsman is about.
'He is facing a stint in the jail with no pay and, when he returns to the Grenadiers, he could lose privileges such as going out in London with the other lads in his company. Twenty-one days has been discussed as a prison sentence. The hierarchy want to put a marker down so no guardsman dares prance around outside Buckingham Palace again.'
Last night, defence sources confirmed that Army bosses are taking legal advice before they convene a disciplinary hearing with the soldier, now nicknamed 'Private Dancer', who is based at Wellington Barracks close to the Palace.
The Queen is understood to have been away when the soldier entertained the crowds. As tourists laughed and cheered, he repeatedly spun around, stopped mid-stride with his foot in the air for several seconds, brushed dust off his rifle and bent down as if to pick something up.
The footage was uploaded on to the internet last month.
But senior officers now believe he should be formally disciplined. Under the Armed Forces Act 2006, a soldier may receive a custodial sentence for 'conduct prejudicial to good order and Service discipline'.
A Ministry of Defence spokesman said: 'We are aware of the video. Anyone who is found to fall short of the Army's high standards can expect to face appropriate action.'
- Daily Mail