Hadn't used DSL in a while, just compared DSL 1.01 (the latest version I had at hand) to a bunch of other minidistros like Puppy/Feather and was very impressed!

I wish to experiment with installing Xen under SUSE 10.* and then installing one or more virtual machines for certain tasks (to be determined). To save space and reduce profile (since security concerns are a major motivation for experimenting with virtual machines), it occurs to me that trying to use DSL might be a good idea. Has anyone tried using DSL for a virtual machine under Xen?

Gosh, do you mean running Xen with DSL as the "main" or domain0 ?
I have not got Xen up yet, but if you have made any progress since your last post - do tell