Xen definitely supports the ARM7/8, but they do not list the RPi in their supported hardware. There are lots of virtualization-related libraries in raspbian jessie, but they all seem to be about managing other platforms, not managing a hypervisor running on the Pi. It could be that the particular flavor of the ARM core used on the SoC is missing some functionality (mmu, iommu, etc.) that would allow you to run a hypervisor on it. Also note that the Pi3 has an ARM8 core -- if you set out on such a journey, better start with that. It's only $39.
If you know enough to write your own kernel, you should be able to write some test code to figure this out, no? :)
(If you do, please let us know!)