It's not the last version, latest is 6.1.0-DS (not RC1, which is release candidate, test version).
Before continuing, make backup in Titanium backup (to be able to restore apps to different ROM)! I also recommend to make nandroid backup (follow second link).
If the apps or phone are crashing, it's not caused by ROM, but most probably by applications. If you want to keep Android 2.2, download the latest version and follow first link to install it. BUT because Android 2.2 needs more memory than Dream has, even with swap memory on sdcard Android 2.2 was pretty slow on my Dream, but it was still stable. If you update from your ROM to 6.1.0-DS, you don't need to wipe (reset) the phone, it's enough to clear Dalvik cache and all installed application and setting will be preserved.
If 6.1.0-DS is still too slow for you, I recommend to download older version (I've tested 4 and 5 also, both was fine and much faster on Dream), let's say Cyanogenmod 5. Go to first link, download the ROM (not the latest, but 5.0.8-DS for Dream), Google apps (Tiny version for Cyanogenmod 5), boot to recovery and follow the guide.
Be warned, that some application you're using might not work on Android 2.1 or 2.0!
HTC Dream: Installing CyanogenMod 5+ - CyanogenMod Wiki
Howto: Using the Recovery - CyanogenMod Wiki