I found the answer without any help from HP. HP seem intent on sending a technician out to replace the motherboard and fan assemblies which now seems ludicrous.
The issue appears to be caused by a bug in the B120i RAID controller affecting other Gen8 products such as the Gen8 Microservers. I found this after much googling:
http://www.avforums.com/forums/networking-nas/1783788-hp-microserver-g8-here-2.html
http://www.avforums.com/forums/networking-nas/1783788-hp-microserver-g8-here-2.html
If the B120i controller is disabled or set to Intel ACHI mode the high fan speeds >75% persist. If a hard disk is connected and a valid array created on the B120i controller the fan speeds drop to less than 10% making the server almost inaudible.
I hope HP can provide an alternative solution that will address this bug.