I know this is late to the game, but there is an option to use an Ext3 filesystem based Storage Repository when installing XenServer. If this is done then the VM disks are actual VHD files stored in /var/run/sr-mount/<UUID OF SR>
.
This also allows for thin provisioning, something supported in Ext3, NFS, and other more enterprise level SR types, but not supported with the default LVM SR type.
During the install, when choosing the disk(s) to use for virtual machine storage, make sure to select "Enable thin provisioning (Optimized storage for XenDesktop)". Even if you aren't going to be using XenDesktop this still is the option that enables the Ext3-based SR versus the default LVM.
For more details, see:
Citrix XenServer 6.1.0 Installation Guide
Citrix XenServer 6.1.0 Administrator's Guide
Search for "ext3" and "thin provisioning" in those documents.
For someone who might want to attempt switching an existing install from an LVM SR to an Ext3 SR, look under the "Converting an Existing Host to Use Thin Provisioning" section in the Installation Guide, though be fully aware that this will DESTROY any existing data and VMs in the LVM SR. So you need to back up or migrate any VMs out of the existing SR before making the switch.
In case Citrix changes the links for the documents, or when new XenServer versions become available, just search Google for "Xenserver Installation Guide" or "Xenserver Administrator's Guide" and it should be pretty easy to find.
Interesting info. Do you have a link showing this option? Would help make a great answer. – Lizz – 2013-03-26T04:06:20.030
@Lizz I've updated the answer with more details and links to the relevant Citrix documents. – nextgentech – 2013-03-28T07:10:30.820