I am currently working to build this on my server.. and it hasn't been a walk in the park.. at all.
Basically.. here is what I have deduced so far:
The FFMPEG that is compiled and ready for use on dreamhost is not complied with mp3lame support, therefore it cannot convert movie files to .flv. Also, the pre-loaded version of php does not include the ffmpeg-php extension, for use with Gallery2 or other Video sharing sites.
Now, at first I tried installing my own version of ffmpeg with lame compiled, but due to the way environment variables are being managed by the shared server, it requires your own version of php to be installed.. and that is the sticking point, being that that I have had trouble compiling php on the shared server without there being lots of errors.
In any case, I am trying again today.. from scratch.. I have used others scripts and tutorials but most don't work. (And the wiki is hopelessly out of date)
I would be happy to detail the process here, when and if I get it to work, and if anyone has traveled this path successfully, I would appreciate any info you have.