> It
> appears that linux sends the termination response to vm before it has
> really completed it's (linux)shutdown. In linux's inittab we have
> "shutdown -h" coded.

But your example shows a automatic reboot and the system trying to come back 
up. Something else is wrong... do you specify vmpoff=LOGOFF in your parm lines? 
You want the virtual machine to log off when it's done. 

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