Not trying to be stupid, but I'm not really clear on what the advantage is of this system. Do I understand correctly that the dom0 OS is still providing drivers and hardware abstraction? So both that and some userland exists somewhere in the stack; it's just not duplicated in the virtualized OSes?
Is the main goal simplicity, performance, or something else?
Userland isn't duplicated, it's 2 totally separated userlands. The userlands may be the same distro in case of Xen (for example RHEL 7) but they still lead separate lives; They are different installations. So that's also multiple userlands in which you have to for example deploy patches (RPM's, Deb's, etc.) for your SSH install.
And yes, I see some value in the reduction of maintenance costs, but you're not doing this manually--you have a package manager of some sort and you're automatically tracking some standard image (either for your company or from some upstream maintainer like Canonical). So conceptually I get the simplicity argument, but practically speaking, it's not really more work to maintain two userlands vs one, right?
I guess there's also an argument of resource (disk, memory footprint, etc) overhead of the second userland. It's not clear to me how significant that is, which was part of my question.
