Hi,
I received my board yesterday and had the same blinking-led problem. I too received an Actiontec MI424WR PSU. (Incidentally, the led on the PSU blinks in sync with the one on the parallella, if that signifies anything.)
After much hunting through the many, many electronic devices I seem to have acquired over the years, I managed to find a 5V, 2A PSU and that produced a solid, rather than blinking led.
Booting is still a hit and miss affair, though, with a combination of the USB problems and the boot sequence freezing at the two penguins stage, both of which I have seen others reporting. So far I have managed to bring up a fully working GUI system (with keyboard and mouse functioning) only twice in numerous attempts.
My next step will probably be to apply Shodruk's suggested fixes -
http://elinux.org/Parallella_Speed_Up_Ubuntu - in the hope that that improves things.
All I have connected to the USB is the radio dongle for a Logitech wireless keyboard/mouse combo. Hopefully my 2A supply is sufficient for this configuration.
I have to say, my main motivation for spending the extra money and purchasing the Accessory Bundle along with my board was the dire warnings that were given about the need for a high-quality, compatible PSU. So this is all frustratingly ironic!
Colin.