Here are my answers to your question based on my experience. I do not have experience with the M620 or M820 but I manage about 240 M610's, 60 R710's, 10 R720's so I am familiar with Dells servers running ESXi 5.1 update 1.
1) Yes I would recommend using the Dell provided ISO if you are not familiar with creating your own package with the needed drivers and software packages.
2) This ISO will include all drivers for Dell supported servers and certain Dell customizations and can be used for new installs no matter the storage option (SD, USB Key or Local HD). The main issue I would to look out for is to make sure you update the firmware on all of your blades with the latest available by Dell as ESXi is very picky with the Driver and Firmware Mismatch also Dell CMC with through some errors on occasion.
Thanks for the replies. I did validate with Dell support that this can and should be used for new installs on any supported media. Still not sure why the summary is written so confusingly. Just waiting on Dell to release a Customized Image Profile for VMware Auto Deploy. Although I could use Image Builder, I'm not entirely comfortable creating and using one if the vendor hasn't bothewred to yet.