I've run into the same problem as described here: http://www.spinics.net/lists/kvm/msg27938.html and I don't see that there was a solution posted anywhere for this. I've tried with both 0.12.3 and the latest git version of qemu-kvm and have the same result. VMs that work fine with KVM enabled do not work with the -no-kvm flag. If I remove the boot=on from the hard drive, I am able to boot an ISO image but if I re-add boot=on the system hangs either in loading GRUB or ISOLINUX if I boot on an Ubuntu install ISO. This is happening on multiple machines (all x86_64). On machines without virtualization extensions this happens regardless of the -no-kvm flag.