Yes you can do exactly want you want to do. You can use the redirect panel under 'manage domains | add a domain' to point your pages where you wish.
You can have many websites using the subdomain fuction. Each subdomain is set up exactly as a separate website with a user/password of its own should you so wish. Likewise yu can set up a subdomain with its own email.
My dog has her own subdomain website (in fact she has two!) so I am sure your sister can.
If you wish you can even give her a dreamhosters.com subdomain to practice on. Just add a subdomain from the above section like 'somenamehere.dreamhosters.com' and if it has not been taken you can fully host it.
The DreamHost wiki is very useful and worth spending a day or two reading various sections.
Be aware that DreamHost have had some network problems over the last few days, and things are just settling down now, so do not worry if things do not happen as they should at the moment.
Opinions are my own views, not DreamHosts'.
I am NOT a DreamHost employee OK!! :@
You act on my advice at your own risk!