Thanks for your great advice thus far, we're still not quite up and running, (when I visit blog.mysite.com I still get the "error id: "bad_httpd_conf" message) so I'm hoping you can help me troubleshoot a few things:
1) When we setup blog.mysite.com, we used a Type A record (in stead of a nameservers record), and pointed it to the IP of my dreamhost site--it's the right IP, I checked. Does that change how I have to setup the domains in the dreamhost panel?
2) Could there be any hosting configuration options that are setup incorrectly that are hindering blog.mysite.com from connecting with the dreamhost server? Things like "Extra Web Security" or "google apps"?
3) You mentioned that I can delete hosing for mysite.com, which I did, should I also delete hosting for blog.mysite.com?
Again, I can't thank you enough for your help.