Wonder what shenanigans the USB device is up to. A bootable drive for flashing backdoored bios/hdd firmware or keylogging? Snapshotting the HDDs? 0day'ing the kernel USB stack?
Probably just a USB stick with Second Look or a similar tool on it. Very first thing you do is dump the running memory on the system. Then you pull the drives, plug them into a write blocker, then image the drives. Modifying anything before you have a complete forensic dump is a big no-no because you need to preserve evidence.
A Linux server (I'm guessing for no particular reason it's a Linux server) would have no reason to automount a USB stick, and its console would be at a login screen (so a HID device would gain nothing).
So my guess for the intrusion scenario would be a "cold boot" attack: plug a specially prepared USB stick, open the server case, short the reset pins in the motherboard (AFAIK, modern motherboards still have the pins for the reset button, even though modern cases don't have a reset button anymore), and tell the BIOS to boot from the USB stick. The USB stick then dumps the memory, which still has data from the previously running system (since it was an unclean shutdown), with some luck including cryptographic keys.
That scenario would also explain why he briefly saw the server back on the KVM: they might have been using the KVM to interact with the BIOS.
The defense against such a scenario would be to aggressively shut down all processes and kexec to a memory-wiping kernel as soon as any unexpected device (not only USB, but also PCI and others) is seen, or if the case is opened. Also make it send an alert message through the network with the details whenever it's triggered, to be able to diagnose why the server shut down without warning.
But there's another possible scenario: the "bureaucratic confusion" scenario. It's possible that the systems at his hosting location got confused, and thought he was no longer a client. The apparent intrusion would be a techie repurposing the servers for another client.