I figured this one out - when you create a new FTP or telnet user login (usually for access to your website files) DreamHost creates a unix user. These users may or may not have a mail address associated with it at the time you create it (its an option). When you go to create a new mail address DreamHost will offer you the option to associate the new address with one of the previously created FTP or telnet users that does not already have a mail address.
Once you have associated a mail address with the user it no longer appears in the “mailbox login” drop down.
The mXXXXXX style mail box logins are just Unix users created specifically for mail access - they have no FTP or telnet access rights and go away when the mail box is deleted.
If you want your users to be able to configure their Outlook or other email clients and not user mXXXXX@yourdomain.com you can create them an FTP user account and then associate that with a mail address using the “mailbox login” dropdown. If you want them to not use their FTP account you could give them a really small FTP disk quota which I believe is separate from their mailbox quota. But really I think its an little bit of extra security
for them to use a mXXXXX style mail login even though its initially confusing for users when setting up their email client.