Today was the first time I had to create a new DomU after upgrading my Xen setup to Debian Lenny. When I booted the VM and logged in via xm console I got some strange errors when installing packages:

Can not write log, openpty() failed (/dev/pts not mounted?)

Additionally, after setting up SSH, I got the following error when logging in with SSH:

Server refused to allocate pty

Solution: install udev, reboot the VM and you’re good to go.