Dreamhost is a great hosting company, and provides a lot of very nice ‘one click installs’ of common software packages. I sometimes use Trac (http://trac.edgewall.org/) for managing hobby development projects, and the Dreamhost one click install worked great, except when it came to setting up authentication (requiring login).
Simply put: the installer misconfigures the trac.ini file for the htdocs_location setting. Rather than using a relative path, it uses an absolute path with full domain name, which causes issues with the authentication configuration when using .htaccess files.
The solution is to change:
htdocs_location = http://www.yourdomain.com/trac/htdocs
htdocs_location = /trac/htdocs
of course substitue the correct/actual path to the htdocs folder if you chose a custom name/path for your Trac install.
Works like a charm!