Hi Jon,
The entire system I would install on HW RAID, and use LVM for
flexibility in domU configurations. You can do things like take LVM
snapshots and have a clone of your system available for testing, for
instance.
In a recent Red Hat class that I took (RH436 - clustering and storage)
we had a dom0 and several domU's - all of the domU's were actually
snapshots of one "gold master" if you will, so that:
1) The amount of storage required is reduced
2) The ability to quickly rebuild one of the domU's to a "known-good"
configuration.
Let me know if you have any further question!