paulen,
First of all, you should not get in the habit of editing *nix "text files" (like .htaccess) in WebFtp.
From the Dreamhost Wiki Article on CGI, PHP, and Databases:
In reply to:
Another problem is the WebFTP text editor available in your Dreamhost panel. After editing a perl script in WebFTP, it will have DOS carriage returns and will no longer work. Do not use Dreamhost's WebFTP to edit your perl scripts. WebFTP is EVIL!!!!
Your best bet is to use a shell text editor, such as pico or nano, to work on such files (which will also eliminate any "permissions" strangeness you see using WebFtp as an editor when trying to save the file).
Alternately, of course, you can use a pure "text" editor on your own computer, and just upload the resultant file(s) via ftp to the appropriate place in your directory structure. Look for an editor you like that is capable of saving "with *nix line endings", or run "dos2unix" from the shell to "post-process" such files. Finding an editor that uses *nix lline endings it the better way to go. There are *lots* of them out there that are free - just google and try a few till you find one you really like.
--rlparker