These subgroups are provided by comps.  anaconda only makes up the names for what's provided on the left side of the pane on the package selection screen.

Modified in comps cvs.

Please note the change will affects also translations: "Virtualization was translated, "Xen" is not.

Client x86_64 comps contains both KVM and Xen groups with correct names.
Client i386 comps contains only Xen group but the Virtualization category contains non existing kvm group:
    <grouplist>
      <groupid>kvm</groupid>
      <groupid>xen</groupid>
    </grouplist>

Server x86_64 comps contains both KVM and Xen groups with correct names.
Server i386, ia64 comps contains only Xen group but the Virtualization category contains non existing kvm group:
    <grouplist>
      <groupid>kvm</groupid>
      <groupid>xen</groupid>
    </grouplist>

This is for the 20100106.nightly trees. Installation not tested yet.

Xen is still the default group.

Andrew,
should KVM be the default ?

No - Xen is the default for the RHEL5 lifecycle

Client i386 installed successfully with virtualization selected. Anaconda UI was showing only the Xen group in Virtualization category. Moving to VERIFIED.

An advisory has been issued which should help the problem
described in this bug report. This report is therefore being
closed with a resolution of ERRATA. For more information
on therefore solution and/or where to find the updated files,
please follow the link below. You may reopen this bug report
if the solution does not work for you.

http://rhn.redhat.com/errata/RHEA-2010-0207.html