You don't really need to change this, assuming the third party already has it set to a valid email address and is willing to approve the transfer when the confirmation email arrives. You can of-course change the WHOIS information via the DreamHost panel once the transfer has completed.
No, he does not need to make any DNS changes. You can wait until the transfer is complete, then use the DreamHost panel to set the name servers for the domain to ns1.dreamhost.com, ns2.dreamhost.com etc.
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