I've had many issues with the Dream, but HTC has released a new mainboard (Since sept 2010) with a different processor(not Qualcomm) working much better.
There might be something in there to help you unbrick the phone, otherwise check the XDA forums for help.
As for ROMs, I'd suggest Biffmod 2.1: http://forum.xda-developers.com/showthread.php?t=745478 It's clean, fast Froyo (Based on Cyanogen, but I've found Cyanogen to be a little on the slow side. BiffMod is way faster.). I've been using it for a while now and it really is awesome.