A Dread Necromancer is a necromancer who's more of a necromancer than other necromancers. In fact, other necromancers wish they were as much of a necromancer as a dread necromancer. They also sometimes wear dreads. I dread to think that this is all anyone could come up with for this class... *BLAM!* Levity is heresy in optimization!
Seriously, kids, Dread Necromancer is considered by and far the actual way you create an optimized necromancer for 3.5. It basically gets nothing but good shit for class abilities/spells, and there's a million ways to break it in half. This class and Archivist are pretty much the best parts of Heroes of Horror; while Archivist leads to some truly broken shit (as in some Tier 0 table-flipping bullshit that doesn't even take a lot of work to figure out), Dread Necromancer is basically more "civilized" because it won't really break a game so much as make sure that you get to play the kind of necromancer that dozens of supplements from 2nd edition to 2.5 have tried - and largely failed - to deliver on.
On the surface, a dread necro is an Cha-based arcane caster with shitty BAB, good Will saves, hit points like a bard, and poor amounts of skill points. They get light armor and can cast in it, and they get all simple weapons plus a martial weapon of choice (greatsword if you're going full optimization, flail or scimitar for style+optimization, and scythe if you want to look cool but be absolute shit in combat). They look a lot like a kind of sorcerer, but there's two differences that make them superior.
The first difference is that a dread necro gets a Goddamn fuckhuge list of class abilities. As in, they get some shit every fucking level. This is one of the few classes in all of 3.5 that doesn't have empty levels, and it's not even like the abilities they get are shit. No, dread necro gets good stuff every level. Okay, Fear Aura isn't stellar, but it's better than nothing, and you even get it at a level that makes it pretty effective (i.e. chases off little mooks, leaving BBEGs ripe for the taking).
I mean, Jesus, look at the 1st-level ability Charnel Touch. Christ, it's negative energy touch damage on command. Sure, your BAB kind of sucks... but touch attacks bypass about 50% of the shit you'd have to worry with on AC, and there's delicious ways to boost your attack roll (which we'll cover later). Oh, wait, negative energy also heals all undead. And your class is meant to make undead minions to aid you in combat. So... unlimited healing of undead? Unlimited healing that can include yourself with Tomb Tainted Soul or somehow becoming undead? Yes, please!
But it just gets better. You get Rebuke Undead, which is fucking stupid for you. Not only can you just steal other necros' undead from them and they can't do much of shit about it (unless they also have Rebuke), but you now get access to Divine Metamagic bullshit that is usually reserved for CoDzillas. Never mind that Liber Mortis and a few other tasty supplements give you ways to bolster your undead even more with your Rebuke.
This is all at 1st level, guys. Level fucking 1.
After that, it just keeps getting better. You slowly start to turn into a lich yourself, gaining DR and fortification (i.e. protection from crits), until you cap off as an actual, factual lich at 20. (Note that this isn't always optimal, but we'll cover that later.) You also start getting enhancements to your Charnel Touch, adding disease and eventually negative levels (not permanent, but still). Negative energy burst to hurt the living and heal your undead; advanced learning to add any cleric or wizard necromancy spell you don't already have to your own list; a familiar which is automatically an improved version over the usual shit (and can deliver your Charnel Touch for you); you even get to control more undead based on your Cha bonus, so you can have more (bigger) minions.
Second to your class abilities is your spell list. You don't get any 0-level stuff (boo), but you get as many spontaneous spell slots as a sorcerer (yay). You don't get to pick your spells (boo), but you automatically know EVERY SPELL of a given level you can cast (lolwut?), and they are a mix of some of the more ridiculous necromancy spells from both arcane and divine sources. You also get access to a few new things from Heroes of Horror like the summon undead variants, allowing you to temporarily shore up your more permanent minions with some cheap, disposable mooks. Oh, also, you get several good touch spells, and you can use spectral hand to deliver Charnel Touch at range.
And just like that, you are a Goddamn supervillain.
Making It Work
You can stick with Dread Necro all the way to 20 without trouble, but before setting course that way, you should decide if you want to actually be a lich, or just make yourself into some other kind of undead thing. There's nothing "bad" about lich by itself, but if you actually plan to play past level 20 into epic shit, you should be aware that lich adds a positively hideous +4 LA on your ECL. That means you loose 4 character levels other folks are getting, and all lich really gives you are slight bonuses to your mental stats, some good defense, and a few offensive options. By contrast, as early as level 3 or 4, you can basically take a level lost and some XP lost to become a necropolitan (Liber Mortis) and get all the fun of being undead without any LA.
(Side note: Necropolitan is one of the least overpowered undead packages you can get: no crazy abilities, no debilitating hunger stuff, you're just a sentient corpse with turn resistance who can actually get healing from rest like a regular person. Note you can't have it both ways with Dread Necro: the mechanic of becoming a lich at level 20 means it overwrites and supercedes your necropolitan template. So no self-healing and all that LA. Most optimizers say "fuck being a lich" and go find four levels of something fun to do.)
Past that, there's only a few really great options to take in terms of prestige classes.
The best one to take on top of Dread Necro with nothing extra is Pale Master. Now, you don't get any Rebuke Undead advancement, and you miss some really fun stuff in the upper levels of Dread Necro that may not be worth it to you. But you do get some pretty neat advantages. You get a per-day animate dead that doesn't require material components, which by itself is pretty fucking good; if you plan to have a nice, big undead army, this is the way to do it for free. The other great things are the undead graft, which gives you even more crazy touch-attack stuff to do. Other bonuses you get are darkvision, deathless vigor (nice Fort bonus except against spells that also work on objects), and tough as bone. The best thing here? Deathless master's touch, which allows you to create zombies that aren't subject to your normal cap on the HD of undead minions you can have. Yes, this does in fact mean you can create armies of weaker zombies, put them up somewhere, and then call upon them when needed, backing up your actual decent minions when it's time to go ham on some fuckers. One big disadvantage here is, you don't advance Rebuke Undead at all, so think carefully before doing this one, because you will have to put in all the work of making undead without simply stealing them from other necromancers when you find them (which is a delightful way to mess with certain BBEGs). With this build, you just go Dread Necro 10 / Pale Master 10, though you could drop Dread Necro to 8 if you want to play with more multiclassing.
Another good option without getting crazy with multiple classes is Fiend-Blooded. It's not as "pure" necromancy as Pale Master, but it's still actually really decent. The 10th-level capstone is worth the loss of spellcasting, because you get a pretty big stat boost along with a few other goodies. Special note here, Fiendish Sorcery is like the regular Advanced Learning you get, except you can add any fire-subtype, enchantment, illusion or necromancy spell. This is fucking great, because it means you can add in a lot more spells you may want for special builds or situations. Want to dip Mindbender for telepathy (and the delicious Mindsight feat from Lords of Madness)? Cool, build Dread Necro 8 / Fiend-Blooded 2 / Mindbender 1, then finish off the rest of Fiend-Blooded and a spare level of Dread Necro or whatever.
Want to get trickier and more powerful? Of course you do, you filthy bitch.
One of the most powerful builds you can probably do is the Ur-Priest / True Necromancer build. It's pretty disgusting; a DM may not flip the table, but he might chuck a book your way. It works like this: you need to start with a high Wis and Cha, trying to get to 20 in both of them (or at the very least 19, so you can actually cast the spells you get access to). Go Dread Necro 8 (for Undead Mastery), then dip Ur-Priest 2 for 2nd level spells. Now you qualify for True Necromancer, which is basically the super-charged Necromancy Mystic Theurge. You need to take True Necromancer 10 to get your 9th-level cleric spells from Ur-Priest, but don't even fret over that: like Dread Necro, True Necro gets shit every level to make up for any problems you might have had otherwise. You get create (greater) undead as SLAs, but sadly still need to pay for the components. However, this build fully advances your Rebuke Undead ability (all classes involved get it, so all contribute to it). In addition, True Necro gives you caster level boosts to all your necromancy spells/SLAs and Rebukes, and you even get a desecrate aura that penalizes turn undead and buffs your own undead with more attack, damage, saves, and hp. While the free animate dead of Pale Master is spiffy, the only really good undead you will ever create will be from create (greater) undead, so it's a little bit of a moot point.
(Why do you need cleric spells? First off, they are jam-packed with buffs that turn you from a bad-BAB fuckstain into a walking fucking war-machine; divine power, righteous might, magic vestment, and a few other buffs allow you to turn into a strangely effective stick-jockey. Second, there's several spells in there to turn your ordinary necromancer's lair into a fucking deathtrap that will stop any meddling kids from messing with you. Oh, and also you can use items that the party cleric can, which should make you really fucking popular if shit goes wrong. Christ, you can even resurrect people, if needed.)
If you don't care as much about having undead mastery, you can do a Dread Necro 7 / Warlock 3 / Eldritch Theurge 10 build. This one is tricky because the invocations you get shore up your necro abilities. For least invocations, take baleful utterance, eldritch spear, and entropic warding; for lesser invocations, take eldritch chain, flee the scene, and walk unseen; for your greater invocations, get chilling tentacles and vitriolic blast. The big play here is to use spellblast to drop area spells in your list on target, use eldritch spellweave to put vitriolic blast on targeted spells (so that they do acid damage and bypass SR), and use greatreach blast to drop inflict and other touch spells directly on choice targets. Note that fiendish resilience will work on you even if you're undead, so enjoy the increased heal rate, as well as the nice bit of DR you pick up to avoid getting punked down too easily. You shouldn't take fell flight; there are more and better ways to get flight for a Dread Necro.
Since it takes a while to get up in level to actually do some useful stuff, you'll need to find some good bread-and-butter feats that will always be useful right off the bat. Improved Initiative, Extra Turning (for your Rebuke ability), and even Profane Lifeleech (Liber Mortis, light area damage that heals you even if you're undead) are all great feats you can use your whole career. Necromantic Presence and Necromantic Might (both in Liber Mortis) are really clutch: they work with the summon undead spells, or your regular minions, whatever you have near you, and on top of that the feats have no requirements to get them. Versatile Spell (Races of the Dragon) is never bad, either; you can blow all your lower-level slots for your big killing spells more often.
Once you hit about level 9, you should be getting (or near to getting) animate dead, meaning it's time to get serious about making minions. Grab Corpsecrafter, Bolster Resistance, and Nimble Bones (all from Liber Mortis). These three feats are really basic and good: more Str, more turn resistance, and more initiative and movement. Your minions will just be better overall with these feats, and since not all your minions will benefit from them right away, don't hesitate to send them off to die as you get a new feat to improve your next batch.
If you're more interested in spellcasting, you can grab Divine Metamagic and turn your Rebukes into metamagic boosts. Good options are Quicken, Rapid, Extend, Persistent, Repeat, Twin, Enlarge, Silent, and Still. Note you can't really do all these things; pick either faster casting, making them last longer, doubling the spells you cast, or being stealthy with your spells. In addition, you'll probably want to take more Extra Turning feats if you can, to have enough juice for these spells.
If you'd like to do more damage with your inflict spells, you'll probably wand Black Lore of Moil (Complete Arcane) which lets you spend money on things that permit you to boost those spells. You can do this in advance and then decide later when you want the extra juice. For more damage, Empower and Maximize Spell are good to use with Arcane Preparation to set up a few really strong spells for that crucial moment you become Uncle Bad Touch to the BBEG, and touch him in a bad place (i.e. his fucking soul).
If you want to be great at delivering touch spells, there's a few feats that can actually help a lot with that. Arcane Strike (Complete Warrior) lets you sack spell slots for better attack and damage bonuses, and these will stack when delivering a touch spell as part of an unarmed strike. Improved Unarmed Strike allows you to not suffer AoOs when doing this, and Superior Unarmed Strike (Tome of Battle) lets you increase your unarmed damage. These things all added together mean that, if you dump some high-level magic into the strike, you could deliver a pretty massive blow to most living things. Note that Charnel Touch can't be used this way, due to it's status as a supernatural effect and the specific way it is used. Mixed up with the damage boosting listed above, you could actually become a really fucked-up "Necro Fu" build that focuses on devastating attacks against living opponents.
As with duskblades, the Draconic Heritage feats are also very interesting for dumping spell slots into more useful attacks or abilities, for situations where necromancy simply can't get the job done. However, these feats aren't quite as strictly useful to a Dread Necro as crafting stronger minions and doing more damage with spell attacks. In general, you can find alternatives to deal with constructs, and undead aren't nearly as big a problem for you (command undead, halt undead, undeath to death, and control undeath all say "no", and if you find something that's really fun you can just Rebuke/Command it).
If you have Dragon Compendium you can take bloodline feats since you're a spontaneous arcane caster. These give extra spells known at each level, and you can take multiple. Normally this comes at the cost of losing opposed spells, but so long as you don't select Fey or Plant, you won't have any to lose.
There's two things a Dread Necro needs to consider. Not only do they need to think of items that help them personally, but they should also consider equipping their best minions so they are also more effective in combat. Lowly skeletons may dress in leftover Medium armor and weapons you stole from orcs and kobolds and shit, but your dread warrior human barbarian / ranger needs a little love and attention there.
Personal items start with defense, because let's face it, you ain't got shit for hit points as a Dread Necro. Now, you may wish to start off with armor, because truthfully it's cheaper and easier to deal with than waiting on expensive robes and such. However, once you actually get the money, go for vest of the archmagi: you get the best armor and saving throw bonuses, as well as recalling arcane spells and blowing spells for healing (which will also work on you if you're undead). You can then either wear armor for the enhancements you can't get elsewhere (as well as an armor crystal for surviving on other planes or whatever), or you can get a really good Body slot robe that does something extra you need (ghost shroud, robe of mysterious conjuration, shadow veil, shroud of scales, robe of blending, robe of eyes, etc.).
For your weapon, you will probably want to do a custom-made runestaff with some good weapon enhancements. For spells, consider greater mighty wallop (Races of the Dragon, and a phenomenal spell for bludgeoning stuff like staves), wraithstrike (Spell Compendium), nerveskitter (Spell Compendium), and greater magic weapon. For enhancements, get +1 Spell Storing on both ends, and add Warning to one end. Put a wand grip in the staff (Dungeonscape) and add a wand of ray of enfeeblement to soften up tougher enemies at range before closing to melee. With this weapon, you should win most initiative checks, do a metric butt-load of bludgeoning damage to foes (no need to overcome DR when you're rolling 7d6 or more damage per hit), and you can hit incorporeal targets you need to hit. For spell storing, borrow a rod to Maximize an inflict spell, then discharge as needed.
Other items are on a case-by-case basis. If you became undead, get a ring of positive protection; if you're still living, get a ring of negative protection. Ring of universal energy resistance is very important, because you don't get any spells for this kind of protection; likewise, you want a mantle of spell resistance as soon as you can afford to get it.
For minions, there are three rods you want to look at. Nighstick (Liber Mortis) actually gives more Rebukes per day, and is so cheap you can buy a million of them and use as needed. Rod of undead mastery (Magic Item Compendium) is truly great: you can control double the HD of undead as normal, meaning you can take this rod on adventures to acquire extra minions for that adventure while leaving your very choice ones back home if you need to. Scepter of the netherworld (Magic Item Compendium) is equally as good, since you can Rebuke undead at a higher level. If your DM is kind, see if you can pay the extra cost to combine these last two rods, or possibly add them to the ends of the above runestaff. After buying all your other equipment, dump your money into more nightsticks until you can't afford them anymore, and just pull them out as needed to get more Rebuking done. Get a darkskull as well, if you run into a lot of positive-energy types like clerics or celestial beings.
You benefit from an artificer monocle, because you get detect magic on the spell list. Metamagic rods may be more useful than trying to get the feats, especially if you only need to juice up only one or a few spells each day. A rod of absorption is a great choice when fighting enemy spellcasters. Additional runestaffs and eternal wands will cover utility spells. Rainment of the Four (Magic Item Compendium) will add a few utility spells to what you can cast.