Fedora already supports bootstrapping itself in a chroot, for example as described in http://www.fedoraproject.org/wiki/FedoraXenQuickstart . Unfortunately to use the procedure you need a MAKEDEV compatible with the one shipped by fedora, and yum. It would be nice to have an easier method to bootstrap it from inside a different linux distribution, for use with xen and other virtualization tecniques (eg: uml, linux-vserver). Other distribution already do this (eg, gentoo with the stage tarballs, debian and ubuntu with "debootstrap") and I think it would be a nice enhancement for fedora too...
The real answre here isn't going to be bootstrapping in a chroot but full support for Xen. In the works for FC5
Not completely true... Other other distributions (eg. suse) support xen but only have a possibility to install a new version of themselves starting from their cotrol panel, which doesn't help if the host system is a different one. What I'm recommending is that it should be kept simple to install Fedora even starting from something which is not Fedora!