There are issue with building really old images such as SLES 11 SP3 on a new host, but I think it can still be made to work. It's been a while since I have done this and thus I do not remember the details, sorry. That said you definitely need a version of kiwi that supports "ec2hvm" as firmware setting. We build our SLES 11 SP4 images with kiwi version 7.02.78.

Here is the <type> definition we use:

<type image="oem" filesystem="ext3" boot="oemboot/suse-SLES11" bootloader="grub" kernelcmdline="console=tty0 console=ttyS0,115200n8 multipath=off NON_PERSISTENT_DEVICE_NAMES=1" boottimeout="1" installprovidefailsafe="false" firmware="ec2hvm">

You need to include xen-kmp-default in the initrd

<package name="xen-kmp-default" bootinclude="true"/>