Benefits of cloning
Reuse an already reliable running computers (only 2.6 kernels).
XEN runs 32 bit distros on a 64 bit host. Xen has the limitation that the guest and host operating systems must be compatible (at the time of writing V3.03 and 3.04). The cloning procedure overcomes this to an extent, allowing the 32 bit distro to run on the 64-bit version of the kernel (even other distros work). We have RHEL4 32 and 64 running on FC6xen64 kernels.
Use the opportunity to resize partitions and change the filesystem types and sizes.
All the usual consolidation stuff the vendors will tell you.