"Flat Turning" option for a Okuma LU300M
congratulations, good choice.
doesn't quite know what it is
They have presentations on CD, do they?
Is this option any good?
sure, if You need it. Otherwise it is just money waste.
Do the mill need to be bigger than the workpiece?
first of all it's not quite a mill. It's a special tool, similar to mill a bit. It doesn't needs to be bigger than a workpiece, but it happens often, especially in case of smaller LB series lathe.
What can i create with it except what the manual says?
Can i create splines?
I would not expect to create something asymmetrical. Technically it's possible. You need to figure out the G M commands for that and maybe some combination of that "mill" cutter.