1) Create a parked domain for example.com right here. You won't be using it, but you need to create your main domain here before creating a subdomain.
2) Create a fully hosted (sub)domain for sub.example.com. This is where your blog will go.
3) In the panel for Domains -> Manage Domains, click DNS for for your domain entry. It will show you the IP address for sub.example.com
4) Go to your other hosting provider and add that IP address for sub.example.com in their DNS.
As long as DreamHost doesn't move you to another server, or otherwise change your IP address, the site will continue to work. Just keep an eye out for an IP address change which will necessitate an update at your other provider.