I hope you're right.

I check the /var and it was only at 69%. There is a file there wmtp that was 440MB. I compressed that file and that dropped the disk usage to 40%. I'm rebooting now, hopefully that would have enough to boot properly.

Nah ... didn't work. Still stops at "Multi-User initialization completed"

Hm.... you did look up what this file is for before compressing it, did'nt you?

[Basic AIX administration on]
If you don't want to keep the information who logged when into your server delete that (i.e. this very) compressed wtmp file. Next time you want to reduce its size use the following commands:
This works online and wtmp history should go back about few days then only (depends on how many logins per day took place). If you want to blank it use But better not compress it while it is in use. (And don't delete a wtmp file that is in use neither!)
[Basic AIX administration off]

Do you happen to have a serial console connected to your server? In that case you might suffer from a wrong cable, wrong ASCII terminal or wrong tty settings. Reason then could be that an open to the /dev/tty via HW handshake is not satisfied such causing the hang when you reach Multi-User initialization completed.

No console cable connected. I did a mksysb backup, it failed with a "Fork ran out of memory" error. And now it boots and stops at the error I stated before. How could the ASCII terminal or tty setting be wrong.

Yes, that was probably clear when you wrote "I'm using the console" .... sorry, silly me.
Deactivate the start of rc.tcpip in the inittab and start over.

Sorry if I'm using incorrect terms. I'm new to this IBM AIX stuff.

To deactive the rc.tcpip, you mean to just comment it out?

Yes. If the server boots ok, the problem is in the rc.tcpip. If it hangs again, comment out rc.nfs and so on. This way you will find out at what operation the problem occurs - hopefully