This is working as designed.
The virtual kernel is supposed to be identical to the server kernel (or
since Karmic: the generic-pae kernel), except with a lot of the modules
removed. To save time and ressources, the -virtual kernel package simply
contains the -server (or now: -generic-pae) kernel image as well as some
of the corresponding modules. It has been that way since 8.10 (Intepid
Ibex).
If you find that this kernel does not work as a domU, file a different
bug about it, as that's a different bug, and a regression that needs to
be fixed.
** Changed in: linux (Ubuntu)
Status: Confirmed => Won't Fix
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linux-image-virtual kernel contains -generic-pae kernel
https://bugs.launchpad.net/bugs/437331
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