Previously, I made a Fedora Core 3 disk image for User-Mode Linux by simply copying the disk image of a running system into a loopback disk image and starting User-Mode Linux using that disk image. That works, but I later found that some of my services didn't start up correctly in UML.
It seems that Mysql doesn't work with the current User-Mode Linuxes based on 2.6 kernels. Apparently, UML doesn't implement some of the new threading features of 2.6 kernels, which causes various problems. To avoid that problem, you have to erase the libraries that use these new threading features. I found a forum that listed this fix
mv /lib/tls /lib/tls.backup
that prevents the libraries that make use of the new threading features from being found. While you're at it, it's probably also a good idea to disable the SELinux features because they haven't been designed to be easily configurable in Fedora Core 3 anyways. Just modify /etc/selinux/config so that SELINUX=disabled (instead of "enforcing").
I also had problems with postgresql, but that was because I forgot to make /tmp world-writable. Unfortunately, my postgresql didn't seem to log anything, so I couldn't really diagnose the problem. I tried to play with the boot commands a bit to get it to log something, but in the end, I found it was easiest to simply run the postgres postmaster from the command-line with
postmaster -D /var/lib/pgsql/data
Currently, my Fedora Core 3 image for User-Mode Linux seems to be running fine. httpd does seem to crash the UML kernel when it exits, but I can live with that for now.