Things I have tried on my xserve1,1 dual dual 2.0 intel:
Install delta 10.6.8 (start of the problem)
Install combo update 10.6.8 (problem persists)
zap pram 5 times (problem persists)
modify the com.apple.hwmond.plist to add -s 250 to the arguments (problem persists)
My current work around is:
sudo launchctl unload -w /System/Library/LaunchDaemons/com.apple.hwmond.plist
(unload that persists accross reboots, change unload to load to re-enable)
The one thing I have not tried that just occured to me is to try removing my usb -> ps2 adaptor for the KVM, in case that is some how causing an issue. Pulling the non OS drives (I do think one of the drives is a non apple drive that was replaced in an ADM, but I inhereted this server from another group). Otherwise, this xserve is pretty much bone stock. I may try these things later when I get a chance.
Perhaps people should list off if they are using any peripherals or ADMs with non apple replacement disks in them (hwmond does after all monitor the status of various things such as these), it would be interesting to see if some correlation forms.
Good luck, have fun, let me know if someone finds a work around that works AND hwmond can run.