So finally, after a few false starts, I have a Pylons-based application running on Dreamhost.
My experience was that the only way to get a working Python installation was to use Virtual Python, as described in the Python on Dreamhost wiki page. The Python 2.5.1 that I compiled myself was crashing left and right, and rather than try and figure that one out I used Virtual Python with python2.4.
Another piece of the puzzle is that you need to use FastCGI on Dreamhost, because Dreamhost seems to kill long running processes like Python. Also, you need to go with the "obsolete" fcgi.py rather than Flup, because Flup seems to be too slow for Dreamhost. The FastCGI script does not need to be named dispatch.fcgi – I have used other scripts with .fcgi suffix successfully, all chmod 755. Using differently named FastCGI script has the benefit that you can easily kill just the FastCGI for a specific application of yours. This post provided a usable FastCGI script for Pylons-based application. The Pylons documentation includes other samples, like this, but I have not yet deployed a real application so just noting that for reference.
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