Chances are if you're reading this you've just pulled yourself out of a xend crash or a similar event which has left one or more zombie VM disk images attached to their loop device. You're trying to restart the VM but you keep getting this message:

Error: Device 2049 (vbd) could not be connected.
File /xen/vm/disk.img is loopback-mounted through /dev/loop/5,
which is mounted in a guest domain,
and so cannot be mounted now.

losetup will only tell you what you already know:

# losetup -d /dev/loop/5
loop: can't delete device /dev/loop/5: Device or resource busy

If you don't know the ID number of the VM before it tanked you can find it in your xend logs. Execute this command to free the loop device:

# xenstore-rm backend/vbd/{VM ID}