No, Dan, in that you have failed to address quite a few variables (as I previously noted) that could have impacted the situation, so your experience could have nothing to do with your use of Moodle 2.1 Issues that should be identified and resolved are whether you used DH's beta php, whether you built your own php and how that was configured, whether you used FastCGI or not and how you configured it, etc.In fact, I have at times seen similar errors resulting from mysql loads, which at DH, might well be an artifact from an other machine altogether.
As you know, DH did not support Moodle 2.x because that versions requirements were not met by DH's shared resources and there is a thread in DH's forums regarding avoidance of one click use of M2 because of such issues as well as substantial discussin of similar matters. In light of that, your suggestion that your setup for 1.9 and 2.x were exactly the same seems a bit disingenuous without further explanation.
As far as the 500 students, that is taken from the source YOU claim YOU relied upon, which suggests that you were clearly comparing apples and oranges as far as the student load on your Moodle versus the load on Sam's Moodle. I am surprised that you don't seem to recognize the logical gap.
In fact, the info you received, at least as published here, is of minimal value because there was inadequate data to narrow the source of the impacts on the source of the advice you relied upon. Yes, Dan, if you never enter a car you will never be caught in one in a car wreck, but to suggest that the answer to automobile injuries is not to get in one is rather extreme, lol, and that is the same kind of analysis going on here. It is the same kind of analysis that had people sprinkling php.ini files in every directory under php5, though only one was necessary.
I am not saying that there is not an issue regarding hosting Moodle 2 on DH shared hosting (though it Moodle 2.0 seems to run fine for me under load - and yes I know you are talking about 2.1.) What I said was that there are indeed, so many variables at hand that without further review we have inadequate information to jump to the conclusions that you did (as opposed to Sam, whose usage would be inappropriare for shared host even under 1.9) and because of that I invited you, as I have historically done, to provide adequte details (which you have chosen not to do.)
As a result, while your Moodle instance may run now, you still do not know why it seems not to run under Moodle 2.1 and while there is comparative data you cold have obtained while running M2 so as to to compare with running under 1.9, you have neither pulled nor shared either that data or details of your configuration.
Lastly I want to make sure it is clear that I am in no way endorsing Moodle 2.x or its use on DH, nor the use of DH shared hosting for production servicing of any substantial concurrent population. Using quiz module on DH shared hosting under 1.9 with even 20 students can bring response times significantly down while there is any load either on the DH web server or mysql server and DH warrants the performance of neither.
p.s. Yes, Dan, I have been using Moodle on Dreamhost for a number of years years and have contributed to not only DH's wiki on Moodle but to resolving DH problems in these forums, and I have been witness to a significant amount of misinformation one way and another. I have worked in IT for some 30 years and have been employed to provide systems administration and instruction in systems administration to the federal government as well as to do web development for a multimillion dollar quasi-public corporation. I've taught a course in LMS at university and have used LMS to support my own teaching at secondary (including managing two labs with a total of 140 seats) and post-secondary levels. I clearly haven't a clue.....