Yep! Ken is right on - he is so musically gifted! A way to think about it is, when you place your capo on fret 3 for the key of G, that now becomes your new "0" fret. Go on up to the next fret "4" which now becomes your new "1" fret, the next "5" fret becomes your new "2" fret, etc. Just know that now you will play fret "6", not the "6+" as in the standard DAD scale played from fret 0. But, your ears will tell you that when you strum the scale! Just know that if you find written dulcimer tab in the Key of G, it will use a "0" number for the third fret and the other fret numbers will be same as without the capo - i.e. "0, 4, 5, 6, 7".
A capo is my best friend when I play with 'hotdogging' bluegrassers, as I have to be prepared to quickly get to different keys. Key of G is their favorite, until some fiddlers show up for Key of A. For keys that I can't get to without retuning the dulcimer (C, F, B flat) I will play partial backup chords or hit the dessert table!
Have fun with it!
Gwen