If I tell it to use an NFS source (eg nfs://server/mnt/cdrom) then itin Centos5 tries to do a CIFS mount instead (I can see it running mount.cifs and in the xterm I ran virt-manager from it then asks for a password). Wow.
If I tell it to use an lvm2 volume (/dev/VolGroup00/xentest - already created at 1Gb) then it goes through, calculates the amount of space required etc etc and then barfs with no error message beyond "transaction error".
The only way I can get it to work is by letting it create a file (eg /xen/test1) and installing via http (why doesn't it allow file:// type install sources? Hmmph!).
(Note: I have selinux disabled, so that shouldn't be a problem).
Fortunately that succeeded; I told it to install the guest without lvm, and so I could then losetup the file to get to the raw filesystem after the install completed and do a dump. In future I can make a file system from this template and build my own config file, avoiding virt-manager totally.
virt-manager... guh!