I am seeing this same error message when I start kvm with an empty disk 
attached right when pxe kicks in. With kernel v3.6-rc3 it works fine, with 
v3.5.3it still fails.
I found a comment from the upstream developer at 
http://www.mail-archive.com/kvm@vger.kernel.org/msg73419.html:
"We'll try to get emulate_invalid_guest_state=1 to be the default for 3.6."

3.6-rc3 indeed has emulate_invalid_guest_state enabled, with 3.5.3 and 
3.5.0-13-generic it is disabled (as shown with cat 
/sys/module/kvm_intel/parameters/emulate_invalid_guest_state).
Unloading kvm_intel and reloading it with emulate_invalid_guest_state=y gives 
me a working kvm again, not crashing when pxe kicks in.

Dave, could you test if setting emulate_invalid_guest_state=y solves the
issue for you too? (sudo rmmod kvm_intel and sudo modprobe kvm-intel
emulate_invalid_guest_state=y)

If that works for Dave as well, I guess the winning upstream commit is
"KVM: VMX: Emulate invalid guest state by default"  (a27685c33a on main
tree from kernel.org).

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https://bugs.launchpad.net/bugs/1045027

Title:
  iPXE kills kvm with KVM: entry failed, hardware error 0x80000021

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