this xf86-video-ati should have it work. see airlied blog
http://airlied.livejournal.com/ and google around xorg a little to have this
confirmed (thi should be on of the latest release 6.7.196-r1).
radeon-hd instead doesn't have 2d or 3d support, so you could only use it
for the eventual base system without xorg fancies for xen. i don't think
that for now it's an option for everyday use.
well, as for the domains, i'd say: let the base domain hanlde hw and bridge
it to the other domains. after that every single domain would be indipendent
from the other and so if one display goes mad you won't have problems with
the other one.

2007/12/9, Florent Ouchet <ouchet.florent@laposte.net>:
>
> Hello,
>
> Thanks for these useful advises, I used VMWare for months (and then
> VirtualBox few months), I want to give Xen the same chance. The best
> option seems to be the installation of a second domain to locally handle
> display, IMO this configuration could be highly unstable if either Dom0
> or "Dom1" starts tripping.
>
> I'll try to use flgrx drivers again on next time kernel-xen source get
> updated (current version if 2.6.20), I'll report back here; Two
> open-source drivers are available for radeon video cards:
> - xf86-video-ati is not able to drive my video card (no matching device)
> - I give a try to the new radeonhd driver which currently gives better
> performance than vesa legacy driver.
>
> Best regards,
>
> Florent
>
>