First, we must prepare a Slackware install in a virtual machine. You could always do this in Xen itself, however I recommend using something else, e.g. VirtualBox, KVM, VMWare or something because I suspect it will be faster. My experience of HVM (non-paravirtualised) Xen is that it is not as fast as KVM/VirtualBox, and we will need to recompile a kernel for this.

Select at a minimum disk sets A, AP, D, K, L and N sets. Install everything. You can try with less if you like, this is the way I've tested.

Now we must create an initrd.

# cd /boot
# mkinitrd -c

And of course, add it to LILO

image = /boot/vmlinuz
  root = /dev/sda1
  label = Linux
  read-only
  initrd = /boot/initrd.gz