Well... that was a scary day and 1/2....
If you have a degraded drive on a HP ML350 G4 and replace it 'HOT' with a new one check the led's. Here's what happened to me.
1. Pull the degraded drive (blinking red X)
2. Spare drive activates
3. Insert new drive
4. Rebuild begins - However.... If ONLY the activity light is blinking it's NOT working. Found this out the hard way after watching my server grind to a halt for 27 hours!
Put the smart start CD in the drive. Reboot the server - Press F1 when prompted to continue rebuild. From the Smart Start screen select monitor system. Bring up the Array Diagnostic Utility (ADU). Verify rebuild progress. Exit and return to windows boot.
Scary, but at least I learned something from this hardware replacement debacle.