You can capture it without storing it locally but you will need a UNC path on the network because you still have to store it somewhere. The work around isn't very intuitive either.
Once your PXE booted in the capture image and to the window that is asking where to store the new image, you check the upload image to WDS server option and connect the server to capture to (your WDS server). You have to do this before you can map a network drive because this action activates the NIC. If you open the command prompt before doing this it will show no network connection. Before hitting next, press [shift+F2] which will open a command prompt. Verify you have a network connection and IP by typing
ipconfig. If you have a valid IP address, you can use the
net use command to map a network drive (ex
net use S: \\your-server\your-folder). Substitute the drive letter you want to use for your network drive and the path to your file server. Now you can browse to the network location to store your image.
I haven't done this in a while, but I'm pretty sure those steps are accurate.
Since this is so annoyingly inconvenient, I usually just use a USB hard drive.