>> FYI: RHEL 7.3 does not suffer from this problem and appears to have 
>> ballooning enabled:
> I imagine CONFIG_XEN_BALLOON_MEMORY_HOTPLUG is set for the Ubuntu kernel?

yes exactly, CONFIG_XEN_BALLOON_MEMORY_HOTPLUG must be enabled for it to
actually increase the physical memory region, which is what the problem
is in this case.

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https://bugs.launchpad.net/bugs/1668129

Title:
  Amazon I3 Instance Buffer I/O error on dev nvme0n1

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