I see no reason in a debdiff why it would be fixed in precise.  Will try
precise's libvirt built on oneiric.

Regarding modified guests, note:

for 11.04, the goal was to run unmodified ubuntu images, but with lxc-guest
        installed, in containers.

for 12.04, the goal is to run unmodified ubuntu precise images with no extra
        packages needed.

However, 'running any unmodified image' in a container is not a realistic
goal for 12.04.  But, for simple guests like yours, it certainly should be
working.

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https://bugs.launchpad.net/bugs/900972

Title:
  lxc instance console output spewed to stdout

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