YOUR root directory is something like /home/me It contains all sorts of configuration files that you do not want to be visible to every tom, dick, and cracker.
The root directory of your WEBSITE should be a subdirectory of that, such as /home/me/www.kittensoup.com You can set the name of the subdirectory in the control panel, to be whatever you want it to be.
It's a fairly common mistake for someone new to upload their site to their root directory, so don't feel bad about it.
When you reconfigure stuff in the control panel, it takes a while for Dreamhost to reset. When you upload files to your site, though, those are available immediately.