I found the problem. VNC has to be ran as a normal user and the VM
only responds on 127.0.0.1, trying to use localhost or the external IP
of the machine causes the same error, or display not available.
So now I have a VNC view of the machine, but its hanging on the
Windows Setup blue screen. At the bottom it says Press F6 to choose
additional drivers. However I cannot input anything, and I've let the
system sit for some time and it never seems to progress through the
setup or loading of files. Even switching from an ISO image to the
physical cd drive with the XP SP2 cd in it doesn't make a difference.
I read in other posts that XP on this older version of Xen needs you
to press F5 instead of F6 and choose normal desktop in order for
installation to start. But like I said before it doesn't seem like any
input is being registered.