Having the same issues: intermintent IMAP connection issues and general unhappiness with SquirrelMail...
if you search on this error string "Connection dropped by imap-server" throughout the forum, you can see it has been happening for years and has still gone unfixed.
I suspect it's because squirrel mail acts as a client to the IMAP server, just like a local mail application would (such as thunderbird or outlook express) and since the IMAP servers are on completely different machines (mine is on murdock I think), separate from where the webmail sits (my web server is scipio), our machines are having occasional trouble establishing good connections to the mail server machines (bandwidth issues perhaps? overburdened mail servers?).
On my last server I used openwebmail, which ran flawlessly! Unfortunately, openwebmail stores mail in the mbox format, Dreamhost prefers to use the maildir format because it is less recourse intensive.
Still, with all the thousands of users dreamhost has, I am not convinced we can't get a better webmail client installed here or at least fix these IMAP connection issues.
Anyone have suggestion?