This is my first time working with ZFS on Solaris 10. I am trying to set up /var in a separate partition from /.
During the installation, I came across the ZFS settings where I selected disks 0 and 1 to be mirrored with ZFS. Next was the option to have /var and / on separate datasets.
Is selecting this option like setting them up with different partitons? I am not quite up to speed with ZFS ... any suggestions?
You already have /var as a separate file system so that would make no sense. I suppose jld suggestion what just an (probably non functional) example showing how to create a new file system for a given directory. It wasn't at all something that directly apply to a critical system directory like /var.
No immediate loss of data as the old dataset would still keep its content but, assuming it succeeded, it would have crashed and rendered your system unusable as it substitutes /var by an empty directory. Even if properly done, it would have make your system not upgradeable as live upgrade expects /var to be part of a boot environment (like yours it is currently Solaris 10 update 8).
That's a wise decision. There is actually no problem with your current setup.