O2 can be finicky machine, some of it is still black magic. First of remove all drives, it won't care.
Also newbie tip DO NOT EVER EVER EVER REMOVE the mainboard or any components without first removing AC cord from Power supply and I recommend you ALSO POP OUT POWER SUPPLY, before removing boards for experimentation. Leaving the PSU in (with charge) can damage Mainboard on removal attempts. Don't short cut, always remove PSU first and install PSU last.
The issue with older SGIs is, the company intended you to have a service contract and a tech. So something PCs have, SGIs don't and it will seem like a pain....it is...but only until it's setup.
The BIOS is called the PROM, the PROM is somewhat simplistic but does perform a basic DIAG BEFORE presenting the Graphic PROM selection (options Interface). Older systems generally don't have a "diagnostic disk" or other tests, newer SGIs ones do (although it's not good).
Some people may disagree with me on this (it's been my personal observation several times) but you'll be missing several PROM commands without an installed OS, including resetting defaults, I know...dumb...whatever.
So what you need to do is
A. Read the O2 manual (not kidding).
http://www.kill-9.it/guido/sgi/o2-wks-hw-reference.pdf
B. While understanding the memory layout situation, see what modules you have and if you can make a BARE MINIMUM RAM CONFIG, to see if errors keep reoccurring. Again, follow PSU removal rule!
c. A red led (that stays that way) on front means you've damaged it, be aware of what you're doing and be gentle with the board insertion. You do NOT need to insert the sound board or drives to use the PROM, only mainboard and PSU.
What I would shoot for (if I were you), get a VERY cheap SCSI SCA 80 drive from eBay (I recommend no less then 6GB but 9GB+ is better if you're fiddling). You'll need to see if it has a working CDROM. IRIX CDs are NOT normal, so do a DISK AT ONCE burn, don't try to mount them under MacOS or Windows they won't look like anything they understand!
Install irix 6.5.22 as best you can (you'll learn a lot), once you have a "mostly" working OS, go back INTO THE PROM and go to the terminal and type "resentenv". You'll then be able to load PROM defaults you can also lookup the date command to set time and date manually (not easy like a BIOS, hard like MacOS recovery).
Once you reset PROM defaults, things may not boot anymore, that's fine...prepare to erase and reinstall under correct, default, PROM settings. If you can do that successfully...when things are working, you can now change out memory modules (label them) to figure out what one failed (if that's the issue). Memory is special, not PC, but it's not that pricey. it does go bad..I've had to happen once over the years.
There is no memtest (not really) just internal POST diags. Exceptions can be CPU based, if it's an R5200-based CPU, they are CHEAP!!!! Otherwise, they are pricey. You won't know if its' the CPU until you KNOW it's not the RAM (yeah, I know...is this really the only way?). Well you're supposed to be back in time 20+ years ago and be on corded office phone with SGI to have a tech come out with modules and swap them to test...yes? Well that's not happening now.
if you get to graphical PROM, your mainboard should be fine! CPU and RAM is going to be your focus. Read the manual and start rotating RAM until you're stable, then you KNOW it's RAM...otherwise it's either still RAM (all bad, not enough extra sticks to test min config) or it's CPU, or CPU attachment to mainboard.
Let us know what you end up seeing and trying, take pictures with a a digital camera or cell phone so you can post exact error messages.
Thanks.