I'm in the KVM group (and have logged out to make change take effect)
and still get the exact same error.  See attached screenshot.

Unable to complete install '<class 'libvirt.libvirtError'> 
virDomainCreateLinux() failed 
Traceback (most recent call last):
  File "/usr/share/virt-manager/virtManager/create.py", line 617, in do_install
    dom = guest.start_install(False, meter = meter)
  File "/usr/lib/python2.5/site-packages/virtinst/Guest.py", line 813, in 
start_install
    return self._do_install(consolecb, meter)
  File "/usr/lib/python2.5/site-packages/virtinst/Guest.py", line 834, in 
_do_install
    self.domain = self.conn.createLinux(install_xml, 0)
  File "/usr/lib/python2.5/site-packages/libvirt.py", line 585, in createLinux
    if ret is None:raise libvirtError('virDomainCreateLinux() failed', 
conn=self)
libvirtError: virDomainCreateLinux() failed 
'

** Attachment added: "Screenshot-1.png"
   http://launchpadlibrarian.net/12914856/Screenshot-1.png

-- 
virt-manager unable to create virDomainCreateLinux
https://bugs.launchpad.net/bugs/203362
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