I though I would write a quick article covering this error as I have not found this issue documented anywhere online and the error is not descriptive enough to hint at the cause. The articles online will have you going off on a wild-goose chase checking disk sector offsets and adding and removing your physical block devices to no avail.
When adding a local storage repository to a standalone XenServer you are not required to explicitly state the host you wish to add the SR to, so the command below works just fine.
xe sr-create content-type=user type=ext device-config:device=/dev/md0 shared=false name-label="Local SSD Storage"
But when adding a local storage repository to a pool member you have to explicitly state which host you are addressing or you'll receive the following rather critic error.
The SR operation cannot be performed because a device underlying the SR is in use by the host.
Simply adding the host UUID to the previous command will resolve this problem.
xe sr-create content-type=user type=ext device-config:device=/dev/md0 host-uuid=[insert your host UUID here] shared=false name-label="Local SSD Storage"
To find your host UUID go to the General tab of the host in the XenCenter console of type 'xe host-list' at the command line.