Freeze when running freebsd-update

[Robert Simmons]

I've run into a totally reproducible freeze in 9.0.  There are a
number of variables involved, but I'm able to reproduce this freeze
100% of the time.

I'm installing very small servers in a Xen HVM virtualization
environment.  Each instance has 128M memory and 4G of disk space.
There is 384M of swap encrypted using geli_swap_flags="-d -l 256 -s
4096".

The rest of the disk space is encrypted with "geli init -b -v -a
hmac/sha256 -l 256 -s 4096 /dev/ada0p4".

After I've installed a VPS in this way, I run the freebsd-update fetch
command and it freezes at:
Applying patches...

I've been trying to diagnose the problem by running top and watching
what happens during this stage.  I noticed the following:

1) the box runs out of physical memory at this stage (totally
expected, that's why there is sufficient swap space).
2) All the processes except 2 sleep:
31 processes:  1 running, 29 sleeping, 1 waiting
3) the box is responsive to hitting enter at the console (it produces
another login: prompt)
4) sshd is asleep, so I can't ssh into the box
5) if I try to login to the console, it lets me enter a username then
locks up totally, it does not present me with a password: prompt.
6) it has not run out of swap, nowhere close:
Mem: 54M Active, 9524K Inact, 41M Wired, 24K Cache, 21M Buf, 32K Free
Swap: 384M Total, 6452K Used, 378M Free, 1% Inuse
7) the moment it runs out of physical memory it begins being unresponsive

Any idea what might be going on here?