@smb - after repeating the test a few times, I too ran out of space with
the default 8GB VM disk size, resulting in a paused VM.  You'll have to
re-create the VMs a little bit differently (--disk <GB>).

ex:
@L0:
sudo uvt-kvm destroy trusty-vm
sudo uvt-kvm create --memory 2048 --disk 40 trusty-vm release=trusty

@L1:
#repeat original repro

ref:
http://manpages.ubuntu.com/manpages/trusty/man1/uvt-kvm.1.html

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https://bugs.launchpad.net/bugs/1413540

Title:
  Trusty soft lockup issues with nested KVM

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