I have the same problem: my virtual windows xp 32 bit sp3 will not boot
with kvm (will freeze quite early at booting with high cpu usage in one
of the two cores (acc. to System Monitor)). It works well with qemu. It
can boot in "Safe Mode" even with kvm if that matters, but in this case
(with kvm) services.exe is eating up all the guest CPU with very high
HDD activity (I had to close QEMU, I couldn't wait Windows to shut
down). I first experienced this during the install after the reboot. I
am not too experienced in Linux, just trying to switch to it, although I
used it a bit earlier. I just installed Ubuntu 10.10 32 bit desktop
edition with the latest updates. I installed the test kernel from the
above link with "dpkg -i linux-
image-2.6.28-16-generic_2.6.28-16.57+bug445456v1_i386.deb" as root, and
rebooted. At boot the system freezed. All the dots were already red
under the "ubuntu" label. I couldn't Ctrl + Alt + F1. Guess the kernel
freezed. I powered my laptop off and back on and fortunately it changed
back to my original kernel, which is:
$ uname -a
Linux Latitude-D620 2.6.35-23-generic-pae #41-Ubuntu SMP Wed Nov 24 10:35:46 
UTC 2010 i686 GNU/Linux

I would send the dmesg output if you build a test kernel, which works
with this version of ubuntu.

** Changed in: linux (Ubuntu)
       Status: Triaged => New

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https://bugs.launchpad.net/bugs/445456

Title:
  kvm hangs booting windows XP Pro SP2 or later, since at least 2.6.28-15

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