That means that the states can pass any law that does not violate the Constitution. The people elect the state legislature and city governments, who in turn make laws governing the state and the city. Therefore, the people can pass laws relating to driver's licenses, traffic, etc. as well as fines for having too many firecrackers.
Your interpretation leaves so much room for abuse by those in power it's not even funny.
The Constitution puts limits on governments, but not as many limits as you seem to think. That's why it's important to elect people who will do their best to keep government limited.
According to your line of thinking national health insurance is not prohibited by law so by rights the Clinton's should've been able to push through Hillarycare (to the detriment of all).
WRONG! National health care is a bad idea and would be devastating to the country if it were passed, but, depending on how National health care legislation is written, if it didn't violate any of the bill of rights, or usurp the right of the states (the states' rights vs. centralized government is an ongoing debate, BTW) or the separation of powers, then it would NOT be un-Constitutional. Just think of Social Security. That's not un-Constitutional, either, whether you think it's a good idea or not. Medicaid (a form of nationalized health care) is also Constitutional, whether you think it's good or bad.
There are many laws and proposed laws that are bad ideas and very intrusive, and bad precedents (precedents are the hallmark of Common Law), but that doesn't make them un-Constitutional. There are lots of bad laws on the books that have passed Constitutional muster, and there ain't a damn thing we can do about it except lobby our lawmakers and elect the people who will repeal those laws. The Constitution is silent on many bad laws, but that is why we vote people in and out of office.