You don't want any erosion to happen on the dam, no matter what part it is. You don't want trees to grow there either. Having said that, you will probably make others nervous about digging and removing the grass which binds the soil together and prevents erosion. Even if I knew you were the best gardener and responsible person in the world, it still makes me nervous. I could see it working, just better be thought out and very carefull.

Is you house downside of the dam? If it is, that's another reason to make sure it is done right. Do you have access to the pond and the right to use it?

How about raised beds, not the typical kind, but where they would be like trays above the slope with only legs disturbing the dam? Keep the grass growing underneath them.