I'm responding to this post about 9 months after it was posted, but am doing so in case others are looking for similar information. It sounds like you didn't adjust your root web directory location within your Dreamhost Panel. Login to your panel and navigate to Domains - manage domains - Edit and then adjust the value of the "Specify your web directory" field to the location of mephisto's public directory. Save your changes, wait a few minutes and mephisto should be running.
I'm currently having a lot of issues keeping mephisto stable here at dreamhost though, so YMMV.