We had a situation recently where a customer was experimenting with XenServer 6.2 and Ubuntu VMs; he accidentally powered off the VM during a distribution upgrade and the VM would only boot with a read-only filesystem. Loading an ISO into the virtual CD drive didn’t do the trick; there’s no obvious way of booting to another medium during the boot process.
The trick is to boot into recovery mode; when the VM is powered off, select it and follow the menus like so:
VM -> Start/Shutdown -> Start in Recovery Mode
The VM should now boot to your Live CD/Rescue CD/etc.