I got the same error when trying to create a fully virtualized guest. (xend.log)

[2007-12-18 22:20:13 4691] INFO (__init__:1094) createDevice: vif : {'bridge': 'xenbr0', 'mac': '00:16:3e:2f:8e:cf', 'uuid': '1c8f9fff-bf70-5e67-82fb-5ebf9cafc9f0'}
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) DevController: writing {'backend-id': '0', 'mac': '00:16:3e:2f:8e:cf', 'handle': '0', 'state': '1', 'backend': '/local/domain/0/backend/vif/3/0'} to /local/domain/3/device/vif/0.
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) DevController: writing {'bridge': 'xenbr0', 'domain': 'centos46_64', 'handle': '0', 'uuid': '1c8f9fff-bf70-5e67-82fb-5ebf9cafc9f0', 'script': '/etc/xen/scripts/vif-bridge', 'state': '1', 'frontend': '/local/domain/3/device/vif/0', 'mac': '00:16:3e:2f:8e:cf', 'online': '1', 'frontend-id': '3', 'type': 'netfront'} to /local/domain/0/backend/vif/3/0.
[2007-12-18 22:20:13 4691] INFO (__init__:1094) spawning device models: /usr/lib64/xen-ioemu-3.1/bin/qemu-dm ['/usr/lib64/xen-ioemu-3.1/bin/qemu-dm', '-d', '3', '-vcpus', '1', '-boot', 'd', '-serial', 'pty', '-acpi', '-usb', '-domain-name', 'centos46_64', '-net', 'nic,vlan=1,macaddr=00:16:3e:2f:8e:cf,model=rtl8139', '-net', 'tap,vlan=1,bridge=xenbr0', '-vncunused', '-vnclisten', '127.0.0.1']
[2007-12-18 22:20:13 4691] INFO (__init__:1094) device model pid: 29830
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) Storing VM details: {'on_xend_stop': 'ignore', 'shadow_memory': '5', 'uuid': '2ec73712-c41e-aece-c722-a51d70b186af', 'on_reboot': 'destroy', 'start_time': '1198012813.63', 'on_poweroff': 'destroy', 'on_xend_start': 'ignore', 'on_crash': 'destroy', 'xend/restart_count': '0', 'vcpus': '1', 'vcpu_avail': '1', 'image': '(hvm (kernel /usr/lib/xen-ioemu-3.1/boot/hvmloader) (acpi 1) (apic 1) (boot d) (device_model /usr/lib64/xen-ioemu-3.1/bin/qemu-dm) (pae 1) (serial pty) (usb 1) (notes (SUSPEND_CANCEL 1)))', 'name': 'centos46_64'}
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) Storing domain details: {'console/port': '3', 'name': 'centos46_64', 'console/limit': '1048576', 'vm': '/vm/2ec73712-c41e-aece-c722-a51d70b186af', 'domid': '3', 'image/suspend-cancel': '1', 'cpu/0/availability': 'online', 'memory/target': '512000', 'control/platform-feature-multiprocessor-suspend': '1', 'store/ring-ref': '127998', 'store/port': '2'}
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) DevController: writing {'state': '1', 'backend-id': '0', 'backend': '/local/domain/0/backend/console/3/0'} to /local/domain/3/device/console/0.
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) DevController: writing {'domain': 'centos46_64', 'protocol': 'vt100', 'uuid': '88a8550c-bc53-d214-c4b5-f8495ef81ef2', 'frontend': '/local/domain/3/device/console/0', 'state': '1', 'location': '3', 'online': '1', 'frontend-id': '3'} to /local/domain/0/backend/console/3/0.
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) Storing domain details: {'console/port': '3', 'name': 'centos46_64', 'console/limit': '1048576', 'vm': '/vm/2ec73712-c41e-aece-c722-a51d70b186af', 'domid': '3', 'image/suspend-cancel': '1', 'cpu/0/availability': 'online', 'memory/target': '512000', 'control/platform-feature-multiprocessor-suspend': '1', 'store/ring-ref': '127998', 'store/port': '2'}
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) Waiting for devices vif.
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) XendDomainInfo.handleShutdownWatch
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) Waiting for 0.
[2007-12-18 22:20:13 4691] DEBUG (__init__:1094) hotplugStatusCallback /local/domain/0/backend/vif/3/0/hotplug-status.
[2007-12-18 22:20:14 4691] DEBUG (__init__:1094) Storing domain details: {'console/port': '3', 'name': 'centos46_64', 'console/limit': '1048576', 'vm': '/vm/2ec73712-c41e-aece-c722-a51d70b186af', 'domid': '3', 'image/suspend-cancel': '1', 'cpu/0/availability': 'online', 'memory/target': '512000', 'control/platform-feature-multiprocessor-suspend': '1', 'store/ring-ref': '127998', 'store/port': '2'}
[2007-12-18 22:21:53 4691] ERROR (__init__:1094) Request wait_for_devices failed.
Traceback (most recent call last):
  File "/usr/lib/python2.5/site-packages/xen/web/SrvBase.py", line 85, in perform
    return op_method(op, req)
  File "/usr/lib/python2.5/site-packages/xen/xend/server/SrvDomain.py", line 85, in op_wait_for_devices
    return self.dom.waitForDevices()
  File "/usr/lib/python2.5/site-packages/xen/xend/XendDomainInfo.py", line 544, in waitForDevices
    self.getDeviceController(devclass).waitForDevices()
  File "/usr/lib/python2.5/site-packages/xen/xend/server/DevController.py", line 149, in waitForDevices
    return map(self.waitForDevice, self.deviceIDs())
  File "/usr/lib/python2.5/site-packages/xen/xend/server/DevController.py", line 164, in waitForDevice
    (devid, self.deviceClass))
VmError: Device 0 (vif) could not be connected. Hotplug scripts not working.
[2007-12-18 22:21:53 4691] DEBUG (__init__:1094) Storing domain details: {'console/port': '3', 'name': 'centos46_64', 'console/limit': '1048576', 'vm': '/vm/2ec73712-c41e-aece-c722-a51d70b186af', 'domid': '3', 'image/suspend-cancel': '1', 'cpu/0/availability': 'online', 'memory/target': '512000', 'control/platform-feature-multiprocessor-suspend': '1', 'store/ring-ref': '127998', 'store/port': '2'}
[2007-12-18 22:21:53 4691] DEBUG (__init__:1094) XendDomainInfo.destroy: domid=3
[2007-12-18 22:21:53 4691] DEBUG (__init__:1094) XendDomainInfo.destroyDomain(3)