Symptom
The option to erase the target volume is dimmed (unavailable) in the Mac OS X Server Installer. The only option is to install over an existing installation.
Solution
Prior to using the Installer, use Disk Utility to erase the RAID volume.
Warning: Remember to back up any important data from the target volume before erasing.
When started up from a Mac OS X Server installation CD, you may access Disk Utility from the Installer menu prior to clicking Continue. If you have clicked Continue, you must restart from CD, or use Disk Utility while started up from a hard disk volume.