From that point of view the advantage is that you wouldn't need to stop
running your current (virtual) machines, you could 'recycle' disk space
(the virtual machines can run from a loopback file), ... enough?
It's a waste of time (in most cases) to try running the installer in
a virtual machine as you'd probably need a separate kernel just for
the installer, and modified scripts (???).
It's easier to install to a new drive/partition and then copy the partition
to a file (or LVM partition if your dom0 has LVM capability).
A new kernel still needs to be built for it (not necessarily a big deal).
You would also need a new xen 'priviliged' kernel for you machine (dom0)
Not enough advantages? How about
:
Using a Debian dom0 I have numerous Debian and gentoo virtual machines
running on my server. Each vm can be started, stopped, paused, saved or
restored at will. Virtual networks can be created/destroyed as necessary,
even the memory size of each vm can be changed WHILE IT'S RUNNING!!!
Also, I've got the vm's running from LVM partitions, so while they're
running I can take snapshots of the filesystem (instantaneous),
stop the vm's and resize it's filesystem ... you get the idea.
The disadvantage is that only dom0 can control the agp graphics card,
so some sort of X-network needs to be setup if graphics are required.
With Xen 2.0.x individual pci devices (USB hubs, network cards, etc)
can be hidden from dom0 and passed to an individual 'priviliged'
domain, however, this ability is not yet in 3.0 (just released).
It can get complicated pretty quickly

so I suggest you read
everything you can get your hands on a few times.
Joining the Xen mailing list wouldn't hurt.
Hope that's enough blurb,
Have fun.