$ ssh vm3.rootspirit.com -l root
root@vm3.rootspirit.com's password:
PTY allocation request failed on channel 0
stdin: is not a tty
Solution:
Kill the DomU (xm console *might* work, but somehow rarely works for me). 
mkdir /tmp/disk
mount /path/to/disk.img /tmp/disk
chroot /tmp/disk /bin/bash
=> in chroot env 
nano -w /etc/fstab
And add (though this is probably not needed): 
none            /dev/pts      devpts    defaults        0   0
And install udev: 
apt-get install udev
Clean up, and restart DomU 
exit
umount /tmp/disk
xm create /path/to/xen/vm.cfg
Should do the trick. :)