I've had this happen to me. For some reason low-level ME stuff does not like the IOpener's graphics card. Originally I loaded all the cabs onto a hard drive and tried to do my install on the iopener, but at the Scandisk step, I had nothing visible on screen, just the blue background. So I had to install using my desktop, and then boot the hard-drive on the IO to detect hardware.
At one point, I must have hard-booted in Windows, because I had the same problem you had. I do not know the exact solution, but I do know that it is solvable and not serious. Try booting the hard drive on your desktop system, make sure it boots completely with no problems, then shut it down correctly. Then move the hard drive to the iopener, remove unneeded devices like the USB hub, and boot it. It should be ok this time. It should go through the device detection process cleanly.
I am guessing here, and I hope someone can give a real answer, but I think the reson has to do with the DOS-mode video drivers. I just think the ME versions, which must be different than the Win9x, don't support the graphics chip in the IOpener.