Hi Panagiotis,
similar problem was seen at Karlsruhe. Here's the comment from Armin, 
who did the install: 

It is a problem with the KVM version, recent kernels and hardware 
interrupt virtualization. It can be solved by passing "-no-kvm-irqchip" 
during the VM startup of the machine.

Hope it helps.
Natalia

Panagiotis Kritikakos wrote:
> Hi all,
>
> I've been trying to install SL 5.3 as a KVM guest but faced problems 
> both with x86_64 and i386 version.
> I used the latest KVM release.
>
> The x86_64 performs the initial boot from the ISO image but it drops a 
> kernel panic, while the i386 will completes
> installation fine but will not boot after that.
>
> I faced the same problems when I tried installing SL5.2. However, I 
> tried with a Xen disk image running SL5.2 x86_64
> and it worked without any problems.
>
> Anybody else seen the same behaviour?
>
> Regards,
> Panos
>