Your hda should be:

<disk type='block' device='disk'>
        <source dev='/dev/vm/ubuntu'/>
        <target dev='hda' bus='ide'/>
</disk>

There is an example:
http://libvirt.org/drvqemu.html

-- 
KVM machines became corrupted after reboot
https://bugs.launchpad.net/bugs/469419
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