For what it’s worth, I don’t think it’s Dreamhost; we’re building a brand new feed on a totally private corporate server and running into the same problem: adds to Google, validates at W3, chokes MyYahoo.
akabin, it looks like you got the rss2 php feed to work on MyYahoo (at least, I was able to subscribe to it); I’ll pay *you* if you can tell me what you did there!