The server shows as being on the Hardware Compatibility List so it should install. Embedded drive controllers often require additional pieces to make them qualify as hardware controllers (a requirement for ESXi). If the install isn't finding a disk to install to you may need additional memory modules etc. You could try to install ESXi to a USB stick. Use a USB drive 1GB or larger.
I'm running ESXi 4 U1 on a Intel S5000PAL server without any problem. ESXi is installed on a USB-Stick. I started with ESXi 3.5 U2 and have done all updates except the latest which is planned to be done next month.
The disk (5x 146 GB 10k) were configured as a RAID5 as a single volume during hardware setup.
I installed ESXi on a USB-Stick as described on many websites just google for them. I plugged in the USB-Stick, configured the server to boot from that USB device. After that I configured the network on the console, enable the ssh access and did the rest with the vmware infrastructure client (now renamed to vmware vsphere client).
I just checked the specs for the embedded controller and it natively supports RAID 10. It may not support RAID 10 as far as ESXi is concerned, without some additional modules. At the very least it may require memory. Without a battery module it would be dangerous to enable write caching. Without write caching disk IO would suffer greatly.
I managed to get it working finally, although Intel said this model SR2500ALLXR is not supported for ESX4i. Thanks to all on the forum who contributed.
The ESX4i cannot see the Megaraid (II) controller, as it is s/w based. So RAID has to be disabled, on the setup screen using F2. When it is rebooted, the BIOS uses the LSI1068 controller and sees drives individually. The ESX4i (update1 or 2) sees the controller as LSI1068.
It is very easy to install ESX4i (U1 or U2) on USB memory stick. No need for IZARC and winimage procedures. Just boot from Installer CD and install ESX4i on the USB Memory stick, which can be seen as disk. However any extra space cannot be accessed by ESX4i, as USB disks are not supported as storage. For the ip address settings etc to be saved, persistent storage SATA disk or SAS disk visible on ESX4i.
If a USB DAT drive is connected, it is visible to Windows guest as SCSI Tape Drive.
I also connected the onboard SATA port to a hard disk using eSATA. whih is recognised by ESX4i.
All the Intel network ports (I have 2 x4 port cards) are available to ESX4i which are now configured with iSCSI.