Only two weeks later I got an answer from IBM that despite Solaris 10 is listed as supported it's not yet supported on LS21 and it should be early 2007. Well I had it already working for two weeks then.
So in order to install Solaris 10 on LS21 you need to go to BIOS and:
1) Select "Advanced Setup", and then "PCI Bus Control" and then select the
"PCI Enhanced Configuration Access" option.
2) Press the <> or
to select "Enabled".
3) Select "Save Settings"
You also need bnx driver to get network working. Driver is provided by IBM on a CD or you can download it directly from Broadcom here. I added it to jumpstart install and then we could install system using jumpstart over the network.