The first step taken here is to perform a completely standard install of the target kernel into a disk image. (Use your standard Xen, VMWare, Qemu or Microsoft install procedure here).
Ultimately the only things which are used after the install are:
/boot
/dev
/etc/fstab
/etc/modprobe.conf
/etc/sysconfig/network
/etc/sysconfig/networkscripts/ifcfg-eth0
/lib/modules/(kernel-modules-for-your-version)
/proc
/sys
Everthing else is deleted and replaced by the equivalents on the clone source machine (is that the clonee or the cloner?). In general here at WT, we try to install the absolute minimum and then clone/yum everything required later.
Other interesting points.
The target kernel doesn't have to come from the original distro. We have successfully run FC4 (both 32 and 64) on a disk image using this process with a FC6_x86_64xen kernel. Likewise, RHEL4, FC5, F7b1