Public bug reported:

I was trying to use file:/ for a VM configuration when debugging another
error, I know it's deprecated in favour of tap:aio: but should still
work and is a compatibility issue with old configs.

This issue occurs whenever i try to 'xm create' - in this example
'beastie' is a new machine that i'd like to get the freebsd installer
running on (config attached) - i've also attached qemu-dm log and the
xen-hotplug.log

xm create beastie.cfg
Using config file "/etc/xen/beastie.cfg".
Error: Device 5632 (vbd) could not be connected. losetup -r /dev/loop11 
/home/xen/domains/beastie/freebsd7bootonly.iso failed

** Affects: xen-3.2 (Ubuntu)
     Importance: Undecided
         Status: New

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losetup fails when using the 'file:/', preventing the DomU from being created
https://bugs.launchpad.net/bugs/211726
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