Hi Serge.

Update on this post. It seems that the problem is the display driver
choice in the VM settings.

The steps I took in installing were:

Click "New VM" button in virt-manager
Type in name and select local install media. Press Forward.
Select an ISO image. OS Type Linux. Version Ubuntu 12.04 (this is the template 
I was referring to).

After much experimenting I managed to solve the problem by selecting VGA
video mode in the VM's settings. The default causing the problem was
Cirrus.

Now that I've got network set up on the VM I've just run the it with
Cirrus graphics and am seeing the same problems but I can ssh in. So, it
would appear that the console freezes rather than the whole VM freezing.

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https://bugs.launchpad.net/bugs/1336801

Title:
  12.04 guest hangs on a 14.04 host server

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