To help anyone who sees this in the future, some of the things needed
to set up netbsd set up properly on a dreamcast:

To burn the disc, you can follow the dc-tools examples you see
anywhere. The only gotcha is that you can't fit the whole
distribution (X included) on one CD. That's fine anyway, you
only want the kernel and base since you need a networked root.

Once you have your boot disc burned you need to start worrying about
the server. To save yourself some worry, here's the short version:
This is your /etc/dhcpd.conf:
shared-network LOCAL {
        option domain-name "your-domain";
        option domain-name-servers 8.8.8.8;
        default-lease-time 604800;

    subnet 10.0.69.0 netmask 255.255.255.0 {
        option routers 10.0.69.1;
        range 10.0.69.128 10.0.69.200;

        host dreamcast {
        	hardware ethernet dreamcast-mac-address;
        	fixed-address 10.0.69.69;
        	next-server 10.0.69.1;
        	option host-name "dreamcast";
        	option dhcp-max-message-size 1024;
        	option broadcast-address 10.0.69.255;
        	option domain-name-servers 8.8.8.8;
        	option domain-name "your-domain";
        	option root-path "/dc";
        }
    }
}

your-domain needs to be your domain name, whatever you want it to be.
The root-path needs to be where the nfs rootfs lives. This is where
you'll extract the netbsd dreamcast sets.

Your exports file will be super simple:
/dc -maproot=root dreamcast

should do it.

A lot of places don't tell you this, but you need to modify the nfs
root before you try and use it too.

You need to mkdir kern and proc, since they're not in by default.
You need to create a swap file (dd if=/dev/zero of=/dc/swap bs=1m count=64)

You need to create an etc/fstab with the following entries:
10.0.69.1:/dc        /	nfs	rw,auto	0	0
/swap        none	swap	sw	        0	0	
/kern        /kern	kernfs	rw
/proc   /proc   procfs        rw	0	0
ptyfs        /dev/pts	ptyfs	rw	0	0
/dev/gdrom0c        /mnt/gdrom	cd9660	ro,noauto	0	0

At this point you should be able to boot into your dreamcast over the network.
Specify "rtk0" as the root device for a netboot.

When you create a user you'll notice that escape and control codes
are broken. This is because you didn't set -o emacs. No, I don't know
why. Even better: change your shell to /bin/ksh.

Edit: I found out why! see http://gnats.netbsd.org/50222
Short answer: add tset to your ~/.profile . Even with ksh
this is broken with programs that read normal stdin.
When first setting up packages you may find that ssl won't work. You
can use ftp.netbsd.org over ftp still to get around this.

You definitely will find that not all the software you want/need is
packaged. Realistically speaking you're not going to build mainstream
software on a Dreamcast. I tried leaving the dreamcast on overnight
and I think it didn't fully make it through one GNU configure script.

Read up on these instructions to cross-compile from your nfs host:
https://ftp.netbsd.org/pub/pkgsrc/current/pkgsrc/doc/HOWTO-use-crosscompile

You may be tempted to try and use X. It's unusable on this platform.
If you decide to anyway for fun, you need this xorg.conf:
Section "InputDevice"
    Option "Device" "/dev/wskbd0"
    Identifier "keyboard"
    Driver "kbd"
    Option "Protocol" "wskbd"
EndSection

Section "InputDevice"
    Option "Device" "/dev/wsmouse0"
    Identifier "mouse"
    Driver "mouse"
    Option "Protocol" "wsmouse"
EndSection

Section "ServerFlags"
    Option "AutoAddDevices" "false"
EndSection

There's a bunch of fiddling around needed in general too. 
You're going to need cross-compilation, as I said earlier,
one easy shortcut for packages which *don't* cross-compile,
which do exist, is to cheat.

pkg_add -P $CROSS_DESTDIR -m sh3el [package]

To install the prebuilt binary in your cross-build directory.
This won't put the package in your package output directory,
but it's a binary anyway, you can just pkgin it on the dreamcast.

Exciting times, a new caveat: when you get getmail installed, it'll
fail because it refuses to deliver mail as gid 0. For some reason,
in NetBSD, wheel is group 0, so if you chose to add your user as
wheel in the installer, it'll break. I had to move my primary group
to users.
.