mount: cannot read /etc/fstab: No such file or directory
That's a pretty clear sign that your initramfs is borked. Probably because your install is borked.
How did you get past partitioning in debian-installer? Last time I did it (ummm... yesterday) I had to export something that I could partition, so your disk being hda1 is rather weird. Mine looks like:
disk = ['phy:/dev/GLaDOS/xen-portaltest,xvda,w']
its on a logical volume, not a file, but that shouldn't matter. Giving it xvda1 or whatever didn't work; it wanted to partition that, which is fairly silly.
With xvda, I went ahead and partitioned that (into a xvda1 for /boot and an xvda2 for a LVM physical volume, but you could certainly just use that for root). The installer then completed normally, and it works after dealing with the bootloader not executable error documented on the Debian Wiki's Xen entry.
To fix this, you need to mount the boot drive (in my case I had to use -o ext2; if you have a different file system obviously substitute that there).
Now just edit /boot/grub/menu.lst (the text editor in BusyBox is vi) and change the drive listed to boot from.
Save and reboot (and cross your fingers)!
Best Answer
Stay away from any in-kernel Hyper-V drivers based on anything let's around say 3.0, since early version were considered staging and were sometimes utterly unstable.
Hyper-V drivers got fully integrated upstream (moved out of staging) with 3.4. While Debian Wheezy (7.0) will be based on 3.2, it will contain a backport from Kernel 3.4, I'm using it here.
Thus said for squeeze: Install with legacy NIC and IDE only drives, then get the Wheezy kernel from squeeze-backports and reboot. Then you'll be able to use paravirt NIC, SCSI disks, additionally you'll get mouse integration and support for more than 1 vCPU.