I can reproduce this in a VM:
1) boot a clean cloud images (uvt-kvm create lp1387881)
2) apt-get install virtinst
3) sudo virt-install --name juju-bootstrap --ram=2048 --vcpus=1 --hvm 
--virt-type=kvm --pxe --boot network,hd --os-variant=ubuntutrusty --graphics 
vnc --noautoconsole --os-type=linux --accelerate --nodisks -d

You'll get the following:

$ sudo virt-install --name juju-bootstrap --ram=2048 --vcpus=1 --hvm 
--virt-type=kvm --pxe --boot network,hd --os-variant=ubuntutrusty --graphics 
vnc --noautoconsole --os-type=linux --accelerate --nodisks -d
[Wed, 05 Nov 2014 16:23:29 virt-install 3297] DEBUG (cli:227) Launched with 
command line:
/usr/bin/virt-install --name juju-bootstrap --ram=2048 --vcpus=1 --hvm 
--virt-type=kvm --pxe --boot network,hd --os-variant=ubuntutrusty --graphics 
vnc --noautoconsole --os-type=linux --accelerate --nodisks -d
[Wed, 05 Nov 2014 16:23:29 virt-install 3297] DEBUG (cli:332) Requesting 
libvirt URI default
[Wed, 05 Nov 2014 16:23:29 virt-install 3297] DEBUG (cli:334) Received libvirt 
URI qemu:///system
[Wed, 05 Nov 2014 16:23:29 virt-install 3297] DEBUG (virt-install:258) 
Requesting virt method 'hvm', hv type 'kvm'.
[Wed, 05 Nov 2014 16:23:29 virt-install 3297] ERROR (cli:445) Host does not 
support virtualization type 'hvm' 
[Wed, 05 Nov 2014 16:23:29 virt-install 3297] DEBUG (cli:448) 
Traceback (most recent call last):
  File "/usr/bin/virt-install", line 273, in get_virt_type
    machine=options.machine)
  File "/usr/lib/python2.7/dist-packages/virtinst/CapabilitiesParser.py", line 
736, in guest_lookup
    {'virttype' : osstr, 'arch' : archstr})
ValueError: Host does not support virtualization type 'hvm'

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https://bugs.launchpad.net/bugs/1387881

Title:
  qemu fails to recognize full virtualization

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