I have looked and seen some other people asking about dreamhost, and how to install there. I haven't installed there, but i know what the problem is.
the problem is with the section that makes the .htaccess file. most notably, this line:
$base = dirname( $_SERVER["SCRIPT_NAME"] );
this line causes it to refer to the non writable "/cgi-system/". this is because with php-cgi, that variable displays the cgi over the php script.
BUT, here's the thing, i noticed that earlier in the code you have the following line:
@mkdir( dirname(__FILE__) . "/wp-inst/wp-content/blogs.dir", 0777 );
This does infact give the wanted value.
I am now going to attempt replacing $_SERVER["SCRIPT_NAME"] with __FILE__ and see what happens for a fresh install. I'll post my results.