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Jul 20, 2014 8:49 AM in response to intandemdesignby Jason L,Hi intandemdesign,
Welcome to Apple Support Communities.
The articles below outline the configurable options and description of status lights indications. From the information in those articles, it looks that Xserve doesn't support the combination of drives your using and a red drive module light means there is a failure.
Xserve (Late 2006) - Technical Specifications
http://support.apple.com/kb/SP22
Base Configuration Configurable Options Hot-plug storage
Three drive bays with one 80GB 7200-rpm SATA drive installed Any combination of SATA or SAS Apple Drive Modules: up to 2.25TB using three 750GB 7200-rpm SATA drive modules; or up to 900GB using three 300GB 15,000-rpm SAS drive modules. 80GB 7200-rpm SATA and 73GB 15,000-rpm SAS drive modules also available http://support.apple.com/kb/TA27369
Indicator Color Description Drive module
(Upper LED)
Red Urgent issue or failure; check the server monitor application for more information. I hope this helps.
-Jason
