I am having the same problem on an HP DL385 system.  The 2.6.16 xen
kernel package works (although it is misnamed, and should probably have
a convenience package to fix the naming conventions).

xen-image-xen0-2.6.16-11.2-generic works

xen-image-xen0-2.6.17-6-generic-xen0 hangs as described above (though
always after the four CPUs have been reported, the progress after seems
inconsistent with each reboot.  It never appears to make it to init.)

-- 
Hangs at boot on AMD64
https://launchpad.net/bugs/65788

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