Its been a while but I recall a blue screen and it says "danger danger" if the hard drive has failed or is missing. I dont think its just KI2, I believe KI1 does this as well.
There is alot of info on this page
http://www.thekillerinstinctproject.com/
One think to check when working with an unknown board is to make sure the boot rom is correct and check the eprom jumper. I have bought boards off ebay three times that were sold non-working. Two of the boards were just missing the eprom selection jumper and one was a board that had a CF card kit without the upgraded boot rom. The best thing to do is burn an any-ide boot rom for it.