As El Diablo mentions, the hack above works to get X up and running.
Unfortunately, you remain stuck in a 800x600 resolution. I found that
using the intel driver works just as well (or just as badly) as the vesa
driver. I'm running latest versions of everything:

libc6-xen-2.7-10ubuntu3
libxen3-3.2.0-0ubuntu10
linux-image-2.6.24-18-xen-2.6.24-18.32
linux-image-2.6.24-19-xen-2.6.24-19.34
linux-image-xen-2.6.24.19.21
linux-restricted-modules-xen-2.6.24.19.21
linux-ubuntu-modules-2.6.24-18-xen-2.6.24-18.26
linux-ubuntu-modules-2.6.24-19-xen-2.6.24-19.28
linux-xen-2.6.24.19.21
python-xen-3.2.0-0ubuntu10
ubuntu-xen-desktop-0.0.1-2ubuntu8
xen-docs-3.2.0-0ubuntu10
xen-hypervisor-3.2.0-0ubuntu10
xen-tools-3.8-4ubuntu4
xen-utils-3.2.0-0ubuntu10
xenman-0.6-5ubuntu1

As above, I'm using a GM965/GL960 integrated Intel card in a Vaio CR420D

-- 
X does not work in Xen, causes crash
https://bugs.launchpad.net/bugs/68440
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