To instance geometry onto hair particles and have them use hair dynamics I created the geometry.
Then I added a plane with a hair particle system using dynamics.
On the geometry to be instanced using the hair I added a Particle Instance modifier and selected the plane containing the particle system as a target as the target.
The orientation of the mesh was not what I expected so I activated the create along paths option in the particle instance modifier. Orientation was still off.
I edited instanced geometry and changed its orientation by rotating it on the X axis 90 degrees, and presto!
Adding a turbulence force field with a high strength (23) that deformed the hair and the instanced geometry along with it.
Here is the blend file to dissect. Blend File