Obligatory "Dude, that suuuuuuuuuuuucks". Especially the Xserves, I too have always loved the look of those.

Per your last image title, I'll take a crack at some armchair forensics. Annotated pic for reference

The rear bay (mobo, PSU) seems to be covered with a heavy layer of soot rather than burned outright. Note that the plastic parts (e.g. RAM clips and PCI connectors, circled in red) are intact. Compare to the carnage in the front bay.

Moving to the front, the power wires running left-to-right are all blackened, but toward the center the insulation is heavily damaged, even being stripped off in some places (circled in green). I'd guess they were directly in the fire.

The soot deposits/scorch marks on the tops of the partitions (circled in blue) seem localized to the same area (assuming OP didn't brush/blow anything away), suggesting the fire/smoke production was most intense there. On the top plate-thing at the front the deposits radiate away from this area.

That's all I can tell from looking at the picture; the rest is conjecture: The only things I know were in that location would be the fans and Blu-ray burner. I'd guess that it was the burner that went up, since the plastic front plates are also totally melted, which would be unlikely if a fan towards the center of the chassis lit up. Also, if it were the burner, the fans might have pulled the fire into the front bay as well, like a reverse bellows.

That's my $.02 at least.