I don't have a sheevaplug, never compiled gcc on a plug........
Applications often require specific patches to compile on ARM, depending on where the source for gcc came from, you may need to patch it.
Check out OpenWRT, they not only support building kernels & root filesestems, but also the 'build tools' to make them like gcc.
First lets try and nail down the problem.
/usr/src/gcc/b3/gcc/xgcc
This binary is being executed from within the source tree (which is unusual).
If it has not been statically linked it may be having issues locating dependant libraries.
Lets determine if this is or is not an issue.
You will need to obtain 'ldd' from somewhere, if it is not already installed.
ldd /usr/src/gcc/b3/gcc/xgcc
Will examine xgcc and list dynamic libraries it is dependant on and the path to them if they can be found.
Post your findings and we will take it from there.
EDIT:
If ldd isn't easily available similar information can be obtained with
/lib/ld-2.7.so --list /usr/src/gcc/b3/gcc/xgcc
note your dynamic linker version number (/lib/ld-?.?.so) may be different.