i don't get it, are you using your domain as the SMTP server or pan.dreamhost.org or what? should just be your domain for mail server. I would'nt sugest php mail, its not truly greate, but smtp should work, just use your domain as SMTP server and your login user and pass for auth, or unless you use a pasific email account then the login would be firstname.lastname@example.org and password being whatever. If this doesn't work, contact the phpbb3 support team and ask them if they know what its problem is, could just be a phpbb3 bug!
I hope this was helpfull, Yes I do try to make sense.