My SME 8 system works perfectly for virtual domains when I do this:
1) Create an ibay in server-manager.
2) Create a new domain in server-manager, and specify the ibay from step 1 as the content.
If this is what you've done and it's not working, you probably need to open a bug report in order to handle the flood of detailed configuration questions you'll have to answer before you'll find out what's going on.
I know it sometimes feels like the forums tell you to open a bug report, and bugzilla tells you it's not a support forum... but in your case you're going to need to run and post the results of a bunch of commands (/sbin/e-smith/audittools/newrpms, /sbin/e-smith/audittools/templates, db domains show, db accounts show).
Lengthy diagnostic output is much easier to deal with as attachments to a bug report rather than in-line in a forum discussion.