My health indicator is red (not blinking). how do i determine if i have hardware problem or need to do server recovery? User's Guide says To see this code, using a paper clip, press and release the recessed Status/Recovery button on the front of the server. The console shows numerous File Errors and lists "I/O Device Error" for each one.
The errors the console is reporting suggest that you have a hard drive that is failing or has failed. If you look at the list of drives in the console, probably one is indicated as the one having problems.
Assuming it's not your system drive, you should remove it from the storage pool using the console, then replace the physical drive. If it's your system drive, you'll need to replace the drive and then perform a server recovery, following the instrucitons in your documentation.