Here's my setup. (Using the account name XYZ as an example)
/home/XYZ/src/python - my python source tree. this directory goes into my PYTHONPATH
/home/XYZ/src/django_src - django sources. this also goes into PYTHONPATH
/home/XYZ/bin,lib,include - anything I had to compile or install that wasn't on dreamhost
I installed python 2.4 and sqlite3 from sources. When building anything from source I set --prefix=/home/XYZ
My top level python package is APP, so for example settings.py is located in /home/XYZ/src/python/APP/settings.py.
set the rewrite rules as documented in the wiki. For example,
RewriteRule ^(.*)$ django.fcgi/$1 [L]
The contents of /home/XYZ/mydomain.com/django.fcgi:
from fcgi import WSGIServer
from django.core.handlers.wsgi import WSGIHandler
os.environ['DJANGO_SETTINGS_MODULE'] = 'APP.settings'
fcgi.py is in the same directory as django.fcgi.
Double-check the permissions to make sure that all files are readable by the XYZ user, and that the database, and any other files or directories that are updated by the web application are writable by the XYZ user.