Umesh, It seems like you are making progress!
You need to edit the php.ini file that is used by your PHP 5.2.3 installation to change that value from "off" to "on".Note that you may be confused about whether the PHP being used by your application actually has been upgraded. You cannot,m in this case, rely solely on the version number as an indication of success (as it seems that your server's DreamHost supplied version of PHP is also 5.2.3 (see discussion below) To tell for sure, you need to check you phpinfo() output and look at the variables). In the phpinfo() output you provided for your site (though it is 4.4.7, it appears you have a custom php installed.
You probably just need to double check to make sure you have the paths properly described and that you haven't somehow written one version of your cutom PHP's over another.
No, you didn't miss anything there. While the manage domains section of the panel shows PHP 5.2.2, some servers at DreamHost actually have version 5.2.3 available (and neither of them has url_allow_ fopen enabled, for security reasons).
From comparing the phpinfo() outputs from the DreamHost and the Servage servers, you can see what tweaks you may need to make to your custom php installation (or php.ini - which may actually be enough) to make Dolphin work.
Unfortunately, the phpinfo() output you provided for your site was apparently generated after you had removed the handler for your PHP 5.2.3 installation from your .htaccess file (as it shows your site is running PHP 4.4.7).
What you need to do is to work through the Dolphin documentation and make sure that all the "features" that Dolphin describes as being required are installed and/or enabled in your version.
As I said in my earlier post to the other user (which I believe you have read), I think that Dolphin will not care whether you use PHP4.4.7 or PHP 5.2.2/3 as long as you meet those requirements.
IIRC, you will need to enable allow_url_fopen and allow_call_time_pass_reference (both of which can be done via your php.ini file - you should not need to actually install a custom PHP for those reasons alone).
You will also need to make sure that whatever functions they rely upon in domxml are available. This may be a problem as they,and DreamHost, use different modules for these things, and I am not sure about the details of compatibility between those modules, and how their codes uses the functions involved (they both use the same DOM libraries, but different XML libraries). The details of that are beyond my knowledge and expertise with PHP configuration (I've never researched the differences between those libraries). This may, or may not, be a problem. If this is a problem, then you will need to compile your own PHP, with the appropriate modules installed and enabled, to get the same "environment" that Servage has for running Dolphin.
You can always test by using the modified php.ini first and see if that works (change both settings described above); if it works you will not need to install your own PHP.
Additionally, in inspecting those provided phpinfo() outputs, you should note that Servage is running mod_php and DreamHost is running PHP-CGI, which can introduce some incompatibilities. This was previously discussed in the other thread, and seems to be what that blogger encountered when upgrading his Dolphin install (note where he added code to facilitate the difference in the environment variable used).