I have a Xen machine running Ubuntu Hardy (8.04.1). I created a guest that was also Hardy, with xen-tools. But after booting it up, the login prompt wouldn’t appear. It would get as far as:

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...
 * Starting OpenBSD Secure Shell server sshd                             [ OK ] 
 * Running local boot scripts (/etc/rc.local)                            [ OK ]

And then just not show anything. The VM wasn’t hung, just the login prompt didin’t display.

After googling to no avail, I lucked out with button mashing some options in my <vm>.cfg file. Adding this to the end of my <vm>.cfg made it work:

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extra = 'xencons=xvc console=xvc0'