As Chris Benninger says over at: http://www.benninger.ca/?p=58 lots and lots of people have the problem with Squeeze and xen4.0 telling them:
launch_vm: SETVCPUCONTEXT failed (rc=-1)
but nobody seems to know what the solution is. I don't know either, but at least here, a solution might get recorded.
In my case, I can start one guest machine. An identical configuration for a second machine fails. Whichever one I start first, is the one that runs, the other gets the error.
I've got at least a dozen other systems (at my work) running great with Squeeze and 64-bit XEN, but not this new machine at home.