Did I understand correctly that someone from Dreamhost provided that information? While I do not work for Dreamhost (I'm just a customer like you), that seems to me to be "questionable" advice and information. If Dreamhost has, in fact, disabled "all f_open functions", they have done it very recently, and without an announcement of any kind. In fact, I just don't believe it is true (scripts would be "breaking" all over the place, and we would be seeing the fallout of it on this forum).
What Dreamhost has announced having disabled is "allow_url_fopen", and that is a "Good Thing"tm for security. As you can see in the linked article, a good replacement for allow_url_fopen is cURL. I think that the advice you were given by FeedDigest is good advice
I can only assume that this came from the same source as the statement that all "f_open" functions were disabled, and I'm really interested in the fact that you indicate that advice came from Dreamhost staff . Firstly, you can still use "fopen" functions in your sites without having to recompile your own version of PHP - you just can't use "allow_url_fopen", as previously stated. Many sites use fopen fuctions all the time to open "local" files that live on their server, and there is nothing wrong with doing that. This gives you another possible workaround for using feeds, as you could use wget to retrieve copies of your feeds from the web and place them on your space, and the use fopen to access them (though I think that cURL is a much better soulution, as it is more secure, and easier to implement).
As for the advice, "As far as curl, I wouldn't use shell commands from a website, it's like an exploit waiting to happen," I can only disagree strongly. cURL is what has been recommended by Dreamhost Head Honcho and Founder Dallas since even before the day they disabled the use of allow_url_fopen on Dreamhost servers.
Compiling and using your own PHP in order to enable a "dangerous" function that Dreamhost has disabled by default to increase the security of all on a shared server carries with it a huge responsibility, and one should be very sure of what they are doing before attempting such a thing. In fact, while I do not mean this to be critical of you in any way, if one does not fully understand why cURL is "better" than "allow_url_fopen", and all the ways that allow_url_fopen can be exploited, they should not be doing this at all!
A little reading on cURL should make it relatively simple for you to modify your PHP to grab your feeds via cURL, and that is what I recommend you should do.
There many posts in this forum , with example code, to help you and the wiki has a great article on the use of curl (a link to that article is included in the previous wiki article I linkdd). Also, there are links in the post by Dallas (linked above) to another tutorial on the use of cURL that was used by many Dreamhosters to help adapt to the loss of all_url_fopen. Finally, there are many regular users on this forum who are proficient in the use or cURL, and have helped many users who post with specific questions or problems.
As another alternative, you might "google" for Magpie RSS, which some find easier to adapt for use on Dreamhost (and which I have used repeatedly to grab feeds) Good Luck!