Your full email address (firstname.lastname@example.org) and password is what you should use to log in to the DreamHost mail server (mail.yourdomain.tld), and "dots" in your email address should not make a difference (they don't for me).
Outlook has what I believe are some "quirks" that often trip people up. Just yesterday I responded to a client with the same issue you are having.
It seems as though she actually was able to connect just fine using the set up instructions in the DreamHost wiki, but didn't think she could because of the "brain damaged" was the Micro$oft "test this connection" thing worked in the account configuration.
Being "trained" by me, she knew better than to leave the "password" stored in the account setup information - which was the source of here initial confusion, because in the setup dialog if the password is not entered (bove the "Save password" checkbox) the test will fail with an error message like the one you encountered. Sthough, and I believe reasonably, that if she didn't enter the password in the setup, she would be prompted for it (lilke she would be when connecting "live", but Outlook didn't do that for the "test" it just tried to use the paswword it didn't have, and the test failed.
Once we actully entered the password in the account setup dialog, the "test" worked. Her confusion was further fueled next when she tried to do some "tests" by using POP3 to send and receive - she set the account to leave messages on the server to do this, and couldn't figure out why Outlook was not retrieving messages that were still in the inbox on the server if she had ever retreived them before.
What she had done was retrieved them (left them on the server) , deleted them on her machine (and purged the trash), then went to send/receive again - but it wouldn't get the messages in the inbox on the server she had already retrieved. Now that would make sense if Outlook saw identical messages already retrieved, but she felt that would not be the case since she had deleted all trace of them from her computer, and was used to ThunderBird's behavior or always grabbing whatever was in the inbox on the server (even if it would result in "duplicates" on her machine. Unfortunately, for her in this case, Outlook "somehow knows" it's already popped a message, even if it is deleted, and it will not get that message again.
At any rate ... just sharing, and hopeful that maybe the clue about the password setting might be relevant and helpful in your situation.
... oh yeah, and encouraging you to use ThunderBird!