First off, I moved away from pygrub a long time ago since I had some problems (IIRC with multiple domU starts at the same time). I've been using pvgrub and now grub-xen, I'm not suffering from this problem any more.
The pygrub block device is very short-lived, so you probably just missed its appearance. With the xl stack, device names are still called xvd?, eg: xl block-attach 0 phy:/dev/local/test xvdc1 trying to use vdc1 instead will result in "invalid or unsupported virtual disk identifier" in xen 4.8 from stable.
