[stomachmonkey]

LED 1 is lit pretty much anytime there is power to the PSU.

Your readings out of the PSU don't sound out of range.

IIRC correctly the 5v are signals and may not read until the proper point in the boot sequence, meaning I don't recall it is a constant 5.

Bad PSU's don't cause kernel panics.

If I had to put money on PSU or MB I'd be betting on MB.

Those boxes are not uncommon and can be had (depending on configuration) from a reseller for as little as $250.

I'd not spend a dime on it but rather part it out on fleabay.

Like I said, they are fiddly beasts, I've seen people break them simply by replacing the HD.

If you want to keep investigating then start looking for readings off the MB connections and not just out of the PSU.

Unlike your standard Windows PC pretty much everything is powered off the MB.

If you've got 12V coming out of the PSU but no reading where power comes off the MB for the HD then that's probably your answer.