The issue is solved. At least I found solution. Seems message "[Errno 28] No 
space left on device" was
absolutely correct. The problem was only to find correct device.
1) Usually RAM of domain0 for the XEN has very small size. It was 512M in my 
case.
2) Ram-disk and especially /run file-system has size as % from the domain0 RAM, 
in my case it was just near 50K and it is not enough to unpack new kernel 
images.

Solution: extent /run filesystem.
1) nano /etc/fstab add line:
tmpfs      /run      tmpfs   defaults,size=128M
Save changes and:
2) mount -o remount /run
3) Check new size with: df -h
4) Run pygrub guest with new kernel.

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https://bugs.launchpad.net/bugs/1742789

Title:
  Xen PV Guest won't boot latest kernel- OSError: [Errno 28] No space
  left on device

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