selinux on xen systems updated from Fedora 8 behave strangely, or fails completely. The problem seems to be that kernel-xen-2.6.21.7-2897.fc9.i686 for example uses selinux policy version 21, when Fedora 9 alpha has in general moved on to policy version 22. The weird behaviour seems to be because the kernel tries to use the policy.21 file left over from Fedora 8.
Should be fixed with kernel-xen-2.6-2.6.25-0.0.rc4.fc9 in tomorrow's rawhide Note, this kernel has no Dom0 support. See: http://www.redhat.com/archives/fedora-xen/2008-March/msg00013.html