I just ran into this myself. In my case, the issue was mixing a xen 3.1
hypervisor with xen 3.2 utilities.  Make sure you are booting off the
correct kernel in grub.... mine somehow ended up pointed at the 3.1
hypervisor as the default!

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Premission denied when trying to init xend
https://bugs.launchpad.net/bugs/228208
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