Actually, FTP was the "industry standard" back around the same time that "telnet" was an industry standard.
Both are outdated and insecure protocols that, I believe, are dangerous to use as they are susceptible to man-in-the-middle exploits.
Times change, and to maintain adequate security today sometimes our tools need to change too, even if it seems inconvenient. The reality is that SFTP is what everyone should be using nowadays anyway, and most of the time you won't even know you are using it because most of the popular and maintained FTP programs now support SFTP (there is no difference at all in how you use it!).
That said, I agree that if DreamHost is going to support FTP at all (and there is a reasonable argument for shared hosting services only allowing SFTP - you can even configure your domain on DreamHost that way if you choose to do so), it should "work" properly, and I'm hopeful they will get those issues resolved sooner rather than later.
In the meantime, anything that encourages the abandonment of obsolete and insecure protocols can't be all bad, and if using SFTP right now provides a workaround to this temporary problem, I'm thinking it's well worth making the jump from FTP now!