I've never used 2005, but have no problems with 2004 & I'm assuming they haven't changed their interface significantly.
Anyway, you can't actually use it to create the database itself. To do this go to the MYSQL tab in the panel (https://panel.dreamhost.com/index.cgi?tree=goodies.mysql&) and create a database. Then you'll also need to modify the user to let you connect from a remote computer (your ip address). After this you can set up Navicat. The hostname you use there is whatever you set it up when you created the database.
Once you get navicat to connect to the database you can create all of your tables & manipulate data to your heart's content.
Hope this made sense. Its been a long week, so I wouldn't guarantee anything. If you need more info, I can try to be more specific.