I think you will find this is standard DreamHost procedure for applications where they think there is a potential for fraud.
I recall reading on the DreamHost blog that the level of fraudulent applications was around 20%, so I can understand them doing all they can to reduce this.
You could try this, but I am afraid it might simply result in your application being rejected.
Surely you can access a fax machine somewhere? Here in Australia, local post offices provide a fax service for those without access to a fax machine, perhaps something similar exists in your country.
I don't think the domain registration is submitted until your application is approved, so if you decide to cancel your application and purchase hosting elsewhere you should still be able to obtain the domain you wanted.
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