greetings, heres my first noob post.. hope its reasonable..
What I would try is to be using physical disk partitions for the xen machine you want to create, not files on the existing filesystem.
so create partitions of the right sizes for your virtual box. maybe you dont have disk spare? maybe loopback devices would be ok to use (I havent tried xen on loopback devices)
then you mount the partitions you just created in the right config under /mnt
so for the xen box, mount the / partition in /mnt
then the /var partition under /mnt/var
then you chroot into /mnt
then you install the xen kernel you want so badly for it to work, setting up grub menu, initrd etc etc
then you exit the chroot, dismount the partitions
and try xm create virtualbox
falko, if you had $1 for every time I hit your page on debian kernel compile, youd be rich, lol...