There's a lot of outdated information on how to set up a custom Python installation for Dreamhost (either on wiki or elsewhere).
After a lot of trial and error, I managed to install Python 2.7.3, virtualenv, pip, and Django 1.4 properly on a Dreamhost shared account.
I've posted the instructions on this blog post. In addition to the manual installation instructions, I've also written a script to streamline the whole process.
Hopefully this will be of some use to others. (I also have a Ruby on Rails setup blog post as well.)