Hmm, I have to give some extra information.

The server running libvirt-bin is hardy. Virt-manager, however, is
running on Lucid. Could it be that Lucid's virt-manager creates
configuration files that can't be read by older libvirt-bin versions?

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Unable to create virtual machine: unknown parameter 'fmt'
https://bugs.launchpad.net/bugs/518854
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