I have exactly the same problem with my system. Just bought a brand new SN85G4 Shuttle and tried to get a Hercules 9800SE AIW to work in it. Like you say, just a blue flicker and nothing else.
I guess the 250W power supply just can't handle the initial drain on the 5V rail from the 9800SE.
Here's what I did :
1) Disconnect the MOLEX to the graphics card
2) Power up the Shuttle
3) 1 second afterwards, reconnect the MOLEX to the graphics card
4) Replace system cover
Should then work just fine. Problem of course is that you have to keep taking the cover off !!! To get round this, you can fit a switch or push-button to the back of the chassis which temporarily cuts the power to the card while you hit the power button.
We shouldn't have to mess around like this. These damn manufacturers need to improve their testing procedures.