Looks like I get to reply to my own post.
I was able to get xrdiags to work by starting it up on my G4 with the xrdiags -user -remote command and then rebooting the Xserve on the CD. For whatever reason the two machines saw each other and the tests took off.
I don’t know if xrdiags -t would have worked, but I suspect it would’ve.
mjm4.