Ok, thanks Carlos. So what we see in the guest logs is that the virtual network 
interface seems to try allocating a 128K receive buffer which fails and that 
triggers some OOM actions resulting in bad things. If I see this right, there 
seems to be 439M of memory available (probably set up as 512M and the rest 
lacking for page tables and so on).
Generally virnet is claimed to be able to really have a hard impact on memory 
(especially if there is any service doing transfers between host and guest) as  
transport is not limited by any transmission speed. Is there something 
configured like that. 
The system can be tweaked a bit by telling it to try having more memory in 
reserve (/proc/sys/vm/min_free_kbytes) but I am not sure this is easily 
implemented for install. Would things improve by just allocating the guests 
more memory (768M, 1024M)?

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https://bugs.launchpad.net/bugs/790712

Title:
  20110531 i386 server ISO: kernel OOPS during install

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