Comment 28 for bug 787091

I can't reproduce this on my natty host which also has cups and the
system-config-printer-gnome running. I don't have high hopes that they
are in fact the culprit, but still it seems worth checking.

Could you try removing system-config-printer-* packages and stop cups,

  sudo stop cups
  sudo apt-get remove system-config-printer-gnome system \
 system-config-printer-common \
 system-config-printer-udev

Log out and back in, and see if after that kvm is able to use the printer.
Then reinstall with

  apt-get install system-config-printer-gnome \
 system-config-printer-common \
 system-config-printer-udev
  sudo start cups

when you are done.