There are a few notes on the net for setting up Xcode 3.2 on Lion. Without too much more trouble, getting these old tools working on the latest OS is also possible. Here’s how.

Follow these instructions at your own risk. Read them before you begin so you understand the risk you’re taking.

• Follow the instructions linked above

• Your machine will panic during the install (seriously)

• Your machine will continue to panic every boot (seriously)

• To fix the panic, remove these offending extensions from /System/Library/Extensions: CHUD.kext, AppleProfile.kext. To do this, you’ll have to do one of these two things:

  *   Boot into Safe Mode (cmd+s) and remove the offending extensions
  

-or-
* Boot to the recovery partition (cmd+r), open Terminal, and remove the offending extensions. The path to these extensions will be /Volumes/Macintosh HD/System/Library/Extensions if you’re using the recovery partition method.

Why is this happening?

My guess is that these are 32-bit kernel extensions, which are unsupported on Mountain Lion. They’re loaded during the install, which causes the first panic. During startup, they’re being loaded, and the panic happens again, forever.