When creating a new user via the dreamhost panel the current default type is ftp.
Default for new user creation should be updated to SFTP and "disallow ftp" should automatically be checked.
Additionally Dreamhost should consider adding the words "Not Recommended" to the right of the FTP option.
Personally I would also try to find a way to tell users attempting to set "ftp" anyway that they will likely find SFTP just as easy to use. Perhaps a dialog box: "Are you really sure? Most ftp clients are just as easy to use in SFTP mode."
Part of the reason ftp is still so popular among Dreamhost customers is because it is the default choice.