I just took the time to try all combinations (pae/non-pae host & pae
/non-pae guest) and all combinations seem to work.

It only takes a lot of time to start up (but an approximately equal amount of 
time in all combinations):
Around 50" to get to the screen with 'Ubuntu 10.10' and the 4-dots progress 
indicator and an additional 15" to get to the login prompt.

Come to think of it, it may not be an exceptionally long time, but for a 
headless system that doesn't run any services except ssh it seems rather long.
@Bart: Can you give it a try? (i.e. waiting a long time before giving up & 
killing the vm)

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https://bugs.launchpad.net/bugs/681141

Title:
  kvm 1.84 hangs (host 32 bit meerkat, guest created by vmbuilder)

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