Of course you need to put the dump in another server as in case of outage you will loose the backup too. You can put it to a removable media but I am not 100% sure if the ufsrestore will work when you restore the root UFS as you have to boot from Solaris 10 DVD in single-user mode and mount it to access the dump.
You may check also this thread:
It seems that it is possible to mount the USB drive when in single user mode. Hope it helps.
Moderator Comment and Action:
You cross-posted this same inquiry to at least one other forum web site:
... and failed to mention that fact.
Good forum etiquette would have you at least paste a URL to your other post(s) so that people wouldn't waste their time posting a reply that is the same as what you've been told elsewhere. That same forum etiquette of a pasted link also gives people the opportunity to (perhaps) learn from the responses you might get on the other forum web site.
Poor etiquette gets posts locked.