"Windows Server CD-ROM " Which version of Windows are you attempting to install?  Where did you get the media? Sounds like your CD drive might be bad.  Make sure it is enabled in the BIOS (integrated devices), and make sure it is not only LISTED in the boot sequence, but that it is also check-marked (to be active).  Virtual floppy/CDROM is not the CDROM drive.
I'm trying to set up a second-hand 2850 with a wiped 4-disc array.  The machine starts up with an amber LED display showing scrambled pixels and the system status indicator on the rear flashes red.  I have normal start-up messages showing on screen.  The ATA controller reports floppy drive number 0 as VIRTUALFLOPPY and number 1 as VIRTUALCDROM.  The SCSI controller reports 1 logical disk, 0 physical disks. I can enter setup, and have enabled memory testing on startup.  4096 MB is reported in setup.  I have set boot order to Embedded VIRTUALCDROM, IDE CD-ROM, VIRTUALFLOPPY, Hard Drive C: I power-up the system with a Windows Server CD-ROM in the drive but after the last of the startup messages I get two beeps and the message "Press F1 to retry boot or F2 to enter setup".  Pressing F1 results in an immediate two beeps and repeat of the message.  Neither the the floppy or CDrom drives light up at any stage. Does anyone have any idea what might be wrong?  As the discs were wiped by the previous owner there is no utilty partition.
PowerEdge 2850 - two beeps, then "press F1 to retry boot..."