Let me re-emphasize the last comment from jrigling:

"apt-get install qemu-kvm" solves the problem in karmic for me. It
uninstalls "kvm" and "qemu" packages from jaunty and installs the new
"qemu-kvm" package from karmic. Problem gone.

This is more likely an installer / upgrade bug than a kernel bug in
karmic.

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Certain VMs do not run under KVM using karmic's kernel
https://bugs.launchpad.net/bugs/379991
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