Dreamweaver was and arguably still is hugely overrated and there used to be a lot of snobbery attached to its use. The implication used to be that you can't possibly be a 'real' web developer unless you are using Dreamweaver, which is just so much nonsense.
A good web developer can create pages and applications in anyone of several software solutions and the editor of choice has less to do with the output than the abilities of the person using it.
That said, Dreamweaver is a highly productive method of developing once you get past the learning curve.
The latest CS3 suite features some very interesting "round trip" capabilities where layouts designed in Photoshop can quite easily be turned into sites in Dreamweaver, and graphics can be sent out from Dreamweaver to Photoshop or Fireworks for editing, then dropped right back in again when done.
It's a market leading product for a reason, but it wasn't always the best at what it did.
The now defunct Adobe GoLive featured far superior site management functions for large sites, and FrontPage 2003 and now Microsoft Expression web both offer a lot to any competent web developer.
The short answer is that Dreamweaver exceeds the needs of most of its users and provided you get a handle on how to use it properly it is very good at what it does.
Lynda.com has some excellent tutorials on Photoshop/Dreamweaver web development.