Sorry in advance for what is probably going to be a long post.
I just got my Pi today, and wired it all up. I picked up a couple of Sandisk 4GB Class 4 cards, and put the Squeeze image from the download page onto one of them. Used a 700mA PSU, Smart Price keyboard and an old Gateway mouse, booted up, worked great. Next bootup, it cutout halfway through boot, and then would only boot to the rainbow screen. Thought it might have been that SD card, so tried the other one, same thing. Tried an old Kingston with no class rating, same thing, rainbow screen. Tried different rated PSU's, different USB cables, unplugging mouse/keyboard, all rainbow. Then read about using the latest kernel helping some SD cards. Realising that was more for Wheezy, I gave it a go anyway, and I had it booting again from the original SD card and original PSU. However, new problem, while I can login on the console fine, after doing startx, the mouse and keyboard both die. It's still running, I can see the little CPU graph in the corner working fine. I guess this might be down to using the newer kernel with the Squeeze image? If it is, what else can I try to get it to boot with the USB working, using these SD cards? I also tried the Risc OS image on the other SD card, that booted once, crashed, and then went to rainbow screen too, so I think I just have a bunch of SD cards the Pi doesn't like.
Any help is much appreciated.