I'm having a similar problem and found a thread (http://communities.intel.com/thread/29904) with some interesting information:
> See the notes in the Tested processor list. As for the
> Server Configurator, you may notice there are two
> versions of S1200BTL - S1200BTL and S1200BTLR.
> The "R" means refresh, indicates support for V2
Hope this helps!
Is the E3 a v1 or v2 ?.
The v2 is not supported on an S1200BTL out of the box. The board needs updating to the latest firmware for v2 compatibility and to do that you will need a processor on the S1200BTL cpu compatibility list (E3 v1 / i3 / Gxxx).
Not sure on your diagnostic code as the diagnostic LED code I received with an unsupported processor was 01011001 (warning was amber).
The P/S AUX power cable is not required. I have an S1200BTL with an E3-1230 v1 running using a Seasonic 620W PSU which does not have the right connector for the P/S AUX power board connection. Just for reference, the S1200BTL quick start user guide is here.