hmm, indeed you are correct... when I run my script with the default PHP, I'm getting imagefttext undefined, and imagettftext doesn't produce any output.
With the PHPs I compiled myself (both PHP 4.3.9 and 5.0.2), both functions work.
Since I've always used my own PHP and remember experiencing this problem, there's a chance it might be a bug in the version of PHP that Dreamhost is currently running.
I'm also looking at the differences in the options between my PHP and the default one. The default PHP uses "--with-freetype=/usr", but it looks like the correct setting is actually "--with-freetype-dir=/usr". (That's what I'm using.) This could explain why the function is undefined.
I'm also using "--enable-gd-native-ttf", although I don't even really know what that does.