On Sun, Jun 9, 2013 at 4:02 AM, Itamar Heim <iheim@redhat.com> wrote:
look at the ServerCPUList config value. you can change the cpu model and flags sent to the qemu (for all VMs)

Thanks! In the web interface (in both L1 and L2) I edited the Cluster properties and set the "CPU Name" to "Intel Conroe Family". Note my actual CPUs are SandyBridge family.

This workaround seems be successful, nested virt is now working, no freezes/pauses.

The next issue I ran into was that both layers were using SHIFT+F12 for the Spice release key causing difficulties.

This fix for that was to change the release key for one of the layers, using the following commands:

engine-config -s SpiceReleaseCursorkeys='f9'
service ovirt-engine-restart