Yes, you can host multiple domains or subdomains on the same account to use for multiple projects.
Yes. But he will need to be made aware of and follow the DreamHost Terms of Service to avoid doing something that can negatively impact your account status with DreamHost.
For backup purposes hosted accounts get a backup user - but you have to use an FTP/SCP client to access them, and you'd have to share the user with your family members.
So you might decide to make them available by web instead. There are a couple of different ways to do that though:
1. You can dump the files in a web directory and rely on the generated directory listing web pages.
2. Uses static pages with links to the images
3. Install an application like Gallery
Since photographs are covered by copyright law you should take that into account. I suggest at the very least leaving a "DREAMHOST_README" file with a statement for DreamHost staff so they don't think you are distributing them without permission of the copyright holder.