a friend of my dad had one very tall cat from egypt and two small dogs.
The cat usally sat silent, and let the dogs play but when the dogs got into a fight with each other, she'd hit both dogs and there be peace, immediately.

I've given a try at making scripts that will do the same for Xen hosts.

lower the chance of dom0 being starved by VMs that are very heavy on IO and CPU, and just as much single VPS affecting others beyond whats tolerable.

The credit scheduler always had issues in that scenario, and I can't help with the root issue - but:
since the scheduler has options, I figured it might be smart to give them some hard thinking and try to make use of them.

I have so far made two scripts "cpucap" and "blksched".
My idea was to run the system unganged until some watchdog times out (i.e. due to very slow disk access). If that happens the scripts (cat) will kick in and should be able to ensure sane default performance for anyone.

If you run a Xen host, please give it a look.
It seems there's a bug with Xen4.1 and Debian (what surprise) though, thats why I did not add support for the credit2 scheduler. Anyway, test on your own risk and let me know if it's showing any benefit when someone trashes his VPS disk / cpu!