Xserve boots from target disk mode but not without it

I'm a high school business teacher and I purchased an Xserve with 10.5 on it 2 years ago with a grant.

I managed to mess up the PHP trying to add GD funcationality for images. (I don't have a programming background and while I have learned a little I was out of my league with adding GD and ended up using a tutorial that was incorrect.)

As it would take my technology director a few months to try to rebuild my PHP mess I decided to re-install the OS on the server.

This is where the problems started.

Here's a summary:

1. Xserve would not boot from the disk on its own

2. Can install 10.5 Server via Target Disk Mode, however, after re-starting the Xserve out side of TDM it will not boot.

3. I have tried resetting the PRAM and have tried installing the OS on a different hard drive (taking out the original hard drives and using a different one)

Still can't figure out why it always freezes while booting (If I hold down "Option" while booting and bring up the possible boot disks, they will appear, but after clicking on one the computer will freeze.)

Any help would be greatly appreciated.