I am looking at your config and notice that your kernel and xen are not located in /boot directory also you are using over 512mb ram for dom0...I have never used ovver 512 and wonder if there might be a limit..just a thought?
I run 3.0 version of xen this is your config:
title Xen 2.0 / XenLinux 2.6
kernel /xen-2.0.7.gz dom0_mem=720000
module /vmlinuz-188.8.131.52-xen0 root=/dev/sda3 ro console=tty0
Here is my working config:
title Fedora Core (184.108.40.206-xen3_7.1_fc4)
kernel /boot/xen.gz dom0_mem=256000
module /boot/vmlinuz-220.127.116.11-xen3_7.1_fc4 ro root=LABEL=/ rhgb
notice i am running from boot directory (you get a message about it expecting it in boot)
Also i am running an initrd image never tried it without one but i understand its
possible..just somthing to think about.
Thats the best i can do to help you out with my limited knowledge. Good luck and let me know if one of these suggestions fixes your problems!
Happy New Year!