When POST (Power On Self Test) flashes the paper-out and paper-jam light simultaneously, this can indicate 
a variety of problems--Apple's Service Source documentation simply recommends that, to get more detailed 
info on this symptom, to run the EPOST (Extended Power On Self Test), which will illuminate the status 
lights with something more specific. See further in this message for info on this, but it's likely that the 
problem is due to something in the fuser assembly. Use an ohmmeter to measure continuity through the heater 
lamp and the three temperature sensor elements (thermistor, etc.)--measure the two big flat pins at the two 
ends of the connector on the bottom of the fuser assembly. If you measure around 2 ohms, the heater lamp is 
probably OK, so the problem would probably be due to one of the temperature sensing elements, usually the 
thermistor. On rare occasion, the heater lamp may measure OK, but it may open up when power is applied, but 
I think I've seen this only once or twice in 20 years.

EPOST test:
You'll need a loopback plug to insert into the printer's DIN8 port (the small round port with eight pins); 
this plug needs to have pins 1 and 2 shorted to each other, and 3 and 5 shorted to each other. Power off the 
printer, plug in the loopback plug, power on the printer, and wait until the status lights settle down and 
begin blinking in a repetitive pattern. Look in Apple's Service Source documentation for the Laserwriter 
8500 to see what the pattern that you see means.