This isn't so much a Linux question, but a hardware question.

My company just purchased a dual hard drive ASUS server that I am going to install Fedora 8 on to run our Proxy Server.

I have configured the hardware RAID as a mirrored raid through the LSI configuration Utility.

The manual for the server instructs how to create a RAID driver disk from the motherboard support CD and then instructs how to boot RHEL (I am using Fedora 8) and at the install command prompt type "linux dd updates" and then put in the driver disk to load it.

My question is, does this RAID driver only apply to software RAID's and since I am using a hardware RAID, do I need it. The manual doesn't specify.

Another problem is that the motherboard support CD will only create a RAID driver on a floppy, and my server does not have a floppy drive.

While there's a slight possibility that you actually have a hardware RAID, unless you have a premium (read: expensive) RAID card attached to your mobo, you probably have a software raid with a hardware interface. This is to say that there's some sort of RAID "device" on your mobo, but, in the end, a driver controls EVERYTHING to do with the RAID, which makes the "hardware RAID" a glorified SATA interface. Either way, yes, you need the driver - hardware or not, assuming you want the drives to be RAIDed that is. You don't need software if you want to run a linux RAID - where the OS controls the RAIDing.
I've seen this before. It's a little hard to answer without knowing the details, but you can try to find out what "linux dd updates" does. I would imagine that it's trying to copy files from the floppy to somewhere on your machine. If that's the case, you simply need to find out what it's copying & where it's copying them to, then do it yourself. This, of course, doesn't apply if you're trying to do it during install. If that's the case, I don't know how to help you. Maybe put the files on a second CD? Maybe call support & ask them? Sorry, not much help.