We had BE 10d with DLO licensed and working. The clients are still talking to the server so the clients are not affected by this error. With the 11d install the DLO option was also licensed with the upgrade license keys.
The media is on the PDC. I had no issues installing the DLO. The error that you would receive if you were trying to install the DLO client on a machine that was not a member of the domain is not the same issue I am having. The issue is when I launch the DLO console I receive the error "Workgroups are not supported in this release. A domain is required."