In response to a few of the comments above, and to send a message to dreamhost who seem to offer longer answers on this board than they do when I write to tech support:
1) Yes, I am running MT with dynamic pages, rather than static. We often change the template of our pages, and there are over 2000 pages on the site. Constant rebuilding of the pages was taking forever, so we switched to dynamic building, which really enhanced the user experience, allowed us to show trackbacks, etc. So while it may be a bad decision CPU wise, it was a conscious one. If anyone out there is actually willing to help me with more information on the pros and cons of each, I'd be incredibly grateful. Is it really too much to expect an mysql server to not buckle under the wight of a few thousand visitors?
2) The spike we saw in traffic was high, but it seemed to me not gargantuan, but then, I have nothing to compare to. Anyone interested can check some stats here: http://www.sitemeter.com/default.asp?action=stats&site=sm3Scaramouch&report=0 and maybe give me a reality check.
Perhaps I'm expecting too much from a shared environment? Everything I read when I set up with Dreamhost talked only about bandwidth and disk usage, and we're still well under our limits there. If Dreamhost actually have a limit of traffic & connections we can take as well, it would be good for them to give guidance on that too. But there's no meter of that that I can see on the control panel, so I don't know how much is "too much" apart from when the site stops working.
3) The last thing I'd want to do is upset someone else's site with our own. Our blog is just a hobby, not a business, so downtime to us is just annoying, not income threatening. But for the same reason, jumping from $8 a month to $100 a month on a dedicated server (which was the only solution offered to me by tech support) seems excessive. Is there some middle ground where we can increase capacity without having to go to the whole dedicated server solution? It took forever to get the blog working like it is now - the thought of having to set it all up again on another server would probably force me to just give up the whole thing.
The most annoying thing is that I think it's just happened again. I wrote a post today that looks like it got picked up by a couple of big US blogs, and the traffic was high all day. Then I noticed a few visitors coming in from Japan tonight, and suddenly the site slowed to a crawl, so I suspect the japanese readers are hammering the site, and I run the risk of being shut down again. And there's not a damn thing I can do about it.
Dreamhost - if you are reading this, can you please help with some advice? I don't want to find another hosting provider - so far, my experience with you guys has been great. I have banners on my site driving traffic to you. But just as we start to get some success, it feels like you're shrugging your shoulders and saying "not our fault, just don't get as much traffic". I'm not expecting the world for $8 a month, but I guess I am expecting you to treat me like I could be a long term customer who continues to upgrade and bring you revenue.