Okay, I upgraded my kernel
uname -a
Linux deb-prq1 2.6.18-12-fza-686-bigmem #1 SMP Sun May 18 13:01:05 CEST 2008 i686 GNU/Linux
but I still have the same issue as before - nothing from the lan/internet is reaching the VE, but I can ping the VE from the HN just fine.
I ran tcpdump on the HN and pinged the VE a few times, here are the results:
tcpdump
tcpdump: WARNING: arptype 65535 not supported by libpcap - falling back to cooked socket
tcpdump: WARNING: venet0: no IPv4 address assigned
tcpdump: verbose output suppressed, use -v or -vv for full protocol decode
listening on venet0, link-type LINUX_SLL (Linux cooked), capture size 96 bytes
0 packets captured
0 packets received by filter
0 packets dropped by kernel