I have the same problem, when I attach a volume, it also show:
"Error: iSCSI device not found at 
/dev/disk/by-path/ip-10.200.200.4:3260-iscsi-iqn.2010-10.org.openstack:volume-00000001-lun-0"

my version is
2012.1-dev (2012.1-LOCALBRANCH:LOCALREVISION)

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https://bugs.launchpad.net/bugs/871278

Title:
  Cannot attach volumes to instances if tgt is used

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