being as i've installed packages other than the default (postgresql) i assume i should periodically update. is this understanding correct?
i know dreamhost compiles php from source so i don't concern myself with that. does dreamhost update the other standard packages or is that our responsibility?
Yes, it's your responsibility. Packages that DreamHost installs will be updated automatically on a daily basis, but you will need to manually update anything yourself that you've installed, whether it's from apt-get or elsewhere.