I figured out what the problem was:

I was using a ps2 keyboard + mouse and then a ps2 to usb converter. DON'T do
that!

It took me one week to figure out traveling from the data center to our
office and back again thinking it was a loose connection with the mainboard
or perhaps ram.

It would have been so much easier to have a "bad keyboard error" rather than
a lot of blinking lights and obscure error codes.

Anyway the hardware wasn't defective and a plain usb keyboard worked so much
better.

-- Henrik