I have finally managed fixing the problem where the M2-ATX would not power up the mobo but instead if you had a switch connected in parallel and manually turned on the mobo everything would work. I had been looking into the pic code for the M2 and it turns out that there is a timing issue with the M2 not fully powering all the line (+12V, +5V and +3.3V) before it sends the on pulse to the mobo. I was able to modify the code in a quick and dirty fashion to fully power all the lines before the on pulse and lo behold, now my mobo powers up every time without any problems.
I would be more than glad to help any of you out there with a PIC programmer to make this mod but I must say it makes the power supply not fully ATX compliant (thats the disclaimer portion). Also, I would request andrei to look into the PIC code and if possible release an official fix for the timing issue.