You need iDRAC Enterprise to to use the full OS install capabilities of the Lifecycle Controller as that relies on the flash storage on the iDRAC6 Enterprise daughter board.
What the USC\Lifecycle Controller gives you in your case is the ability to build servers using the built in Server Build tools - these still require you to provide OS media during the start of the build process but they will then automatically drive the installations and add in \ configure all the platform specific drivers provided your chosen OS is supported. You could combine this with a cheap usb Flash drive of your own installed on the internal USB port to hack together an effective substitute.
This capability in the USC is basically an embedded version of the capability that Dell have provided with their SBUU (Server Build and Update Utility) CD's for previous platforms. To be honest this is the most useful capability, the full "media-less" OS install is more of a gimmick at this stage IMO. It has promise but isn't quite there - even with the full iDRAC6 Enterprise you are limited as Dell's official vFlash cards are quite small (<1GB last time I checked) and so can't hold a full copy of something like the W2K8 install media and you do need to pre-populate the card with the OS build(s) of your choice.
As a general principle though having the SBUU capability "embedded" on a server along with the ability for that utility to update itself and the drivers it uses is very useful, for people like me at any rate as I spend quite a bit of time with customers who don't have the media that shipped with their servers.