Hosting for a friend?

I could use a little help here. I want to help a friend out and host his domain for him. He currently has no host, but has registered the domain.
I understand that he needs to contact his registrar and change his DNS to
ns1.dreamhost.com: 66.33.206.206
ns2.dreamhost.com: 66.201.54.66
ns3.dreamhost.com: 66.33.216.216
Is it then just a matter of setting up a subdomain and redirecting through htaccess? Or does he need to put the .htaccess file somewhere else?

I understand that once the DNS propagation takes place, it will redirect to the above servers, what I don't understand is how myfriendsdomain.com then knows that subdomain.me.com is where the actual pages are located.

It appears I may be making this more complicated than it really is. All I have to do is add the domain. All he has to do is point to the DNS through his registrar.

Correct. With unlimited domains, you can set up his domain here just as you created yours. Just create a new FTP user for him and make him the owner of the new Fully Hosted domain.

-Scott