So I want to change my sites FTP DNS.
But from what I am reading I have to disable webhosting on the whole site?
Does this mean that if I want to host the website at dreamhost I have to leave the ftp site and dreamhost?
Not necessarily, you can create additional DNS records of course, but if you want to change ftp. yourdomain.com you will have to have support change that record for you. If you just need to do something like ftp2. yourdomain.com you can do that one yourself.
(I had to put a space in those to make the forum software not try to make them http: links)