I had the same problem and it seems like Manuel's suggestion per
http://mail-index.netbsd.org/port-xen/2006/10/17/0009.html solves the
problem.

On 11/4/06, Pavel Cahyna <pavel.cahyna@matfyz.cz> wrote:
> On Sat, Nov 04, 2006 at 09:36:44PM +0100, Rainer Brinkm=F6ller wrote:
> > Hi,
> >
> > after i did install NetBSD 3.0.1 on my new Hardware and did update it t=
o
> > -CURRENT
> > on this way: http://www.netbsd.org/Documentation/current/#updating
> > i did install grub, xentools30, xenkernel30 and xentools-hvm
> >
> > Then configured grub. Reboot and .. failure ... remember ... sure, the =
kernel
> > file is to big
> > So, gzip the kernel file and reboot. Failure again.
> >
> > First Error when want to start by using kernel xen.gz and netbsd-XEN0.g=
z as
> > module:
> >
> > kernel (hd0,a)/xen.gz dom0_mem=3D131072
> >      [Multiboot-elf, <0x100000:0x7e5d8:0x47a28>
> >
> > Error 3: Bad or corrupt data while decompressing file
> >
> > Maybe something wrong with the xen.gz kernel file?
> > The second Error i've got when want to start by using kernel netbsd-GEN=
ERIC.gz
> > as module:
> >
> > root (hd0,a)
> >     Filesystem type is ffs, partition type 0xa9
> > kernel --type=3Dnetbsd /netbsd-GENERIC.gz
> >      [Multiboot-elf, <0x100000:0x9ddfc0:0x0>
>
> Don't use --type=3Dnetbsd if the kernel is Multiboot, I think.
>
> Pavel
>