From your initial post:
In reply to:
While trying to install Joomla, in the part where I have to input database info...
Database Type
Host Name
User Name
Password
Database Name
I enter all the information correctly, but I get this error
Access denied for user 'seeker'@'68.251.0.0/55.25.24.0' to database 'joomla' SQL=CREATE DATABASE `joomla` CHARACTER SET `utf8`
Iam guess dreamhost doesn't allow scripts to create new DB...
So how do I install Joomla, manually... I don't feel comfy with one-click installers.
Yes you are correct, that DreamHost does not allow you to databases except via the Web Panel->Goodies->Manage MySQL screen(s).
That said, the way you install Joomla!, or another program that needs a MySQL database, is to create the needed database in the web panel *before* running the installation script and use the information for **that* database for the Database Type, , Host Name, User Name, Password, and Database Name fields.
In reply to:
Also, is it safe to put the main FTP user/pass in the configuration during the installation of Joomla
I think it is as safe as using FTP ever is (I prefer SFTP), but it is important to realize that you *do not need to enable the "FTP layer" at all for Joomla! on DreamHost because PHP-CGI running under suexec avoids the permission issues the FTP layer was designed to avoid. I never install the FTP layer at all. 
And from your last post:
In reply to:
An error occurred while trying to create the database joomla.
The User may not have privileges to create a database. The required database may need to be created separately before you can install Joomla!.
Correct - that is precisely the case on DreamHost (see preceding).
--rlparker