This is an update of my experience for any other new users of Drupal on DreamHost. I hope it helps.
I was able to get images onto a page using a standard Drupal 7.x install (I used 7.4) and this is how I did it.
1- download Drupal 7.x zip from Drupal.org
2- unzip the archive and manually move the contents of the ‘drupal-7.x’ folder into your domain name directory on the DreamHost server. You can access this area through the web control panel for your DreamHost account. Click on ‘Manage Users’ in the toolbox and then ‘webFTP login’. The webFTP upload won’t allow you to upload a zip archive of this size so you have to do it in parts. (Tip: you can zip the individual folders and upload them as archives of files, then upload the other files using the single file uploader.)
3- Next, go back to the web control panel on DreamHost and enter the ‘MySQL Database’ section from the toolbox. Create a new database and remember what you use as host name etc. you’ll need to enter this information during the Drupal install.
4- Go to your website address after making sure that the domain is fully hosted and not parked. This is controlled in the ‘Manage Domains’ section of the toolbox.
5- You should see a login field to begin the Drupal install. Follow the prompts and add your database information when asked. Also make sure to replace the ‘local’ option in the advanced settings with your database name as well. I think this is required for DreamHost.
6- If all goes well, you should be able to complete the Drupal install. Once that’s done, you can create some content but first you might want to put your site in ‘maintenance mode’ (Home » Administration » Configuration » Development).
7- Next, create a basic page from the ‘Add content’ link on the default home page.
8- In the body of this page use an html image tag to reference an image you’ll place on your FTP site. It should look like this
The part at the end “#overlay-context=node/1” was the bit that kept this from working for me.
9- Change the text drop down menu in the editor to ‘Full HTML’.
10- Go back to your FTP interface and upload the image file you named in the html img tag to ‘YOURDOMAINNAME/sites/default/files’
And that’s it! Simple right? Not really, but as far as I can tell this is the easy way using the standard modules in Drupal 7.