Hi,
Thanks for the Alt+F12 tip, i was unaware of that. The debug screen does show some warnings of which i don't really understand. It mentions usb storgae which i am not using. I have attached a screen shot below (it looks quite small on here so hoping you can download it and enlarge).
I have opened a support call with HP as the blade is still under warranty, but having to go through the motions with them as diagnostics does not point out any hardware failures. May also open a call with VMware as we have support with them. I also tried installing windows 2008 R2 and that failed at the file copy saying it couldn't find files. Have also tried installing windows and ESXi from a usb key to try and rule out problems using virtual media via the ILO.