I downloaded the Microsoft Server 2008R2 Standard version from Microsoft website and booted a brand new VM with the ISO and 2 dedicated threads from the same pair (not used by any other VM) and the DVD wouldn't boot. It would show "Windows setup is starting" and then go to a full black screen. Once I switched the VM from 2 threads to 1, I was able to successfully install WS2008R2 SP1 without any hiccup. Now that the installation is over, I'm trying to enable again a second thread from the same CPU but same issue, screen goes black, VM is rebooting automatically and the repair utility tries to start but also goes to a black screen. I can't do anything if I have more than 1 thread assigned to the VM.

 

I tried multiple different threads. I have a brand new E3-1245 V6 Xeon CPU. By default WS2008R2 Standard supports up to 4 different CPUs so I don't really see what's the issue in here. I tried adding multiple threads to my other Linux VMs and didn't have any problem, only this Windows VM is problematic. Here is the XML configuration with only 1 thread (this configuration is working). I used the WS2012 model since WS2008R2 wasn't there and it's quite a big update over WS2008.

 

<domain type='kvm' id='51'>
  <name>windows</name>
  <uuid>1a4de10e-89f9-46a4-421b-8af680589e34</uuid>
  <metadata>
    <vmtemplate xmlns="unraid" name="Windows Server 2012" icon="windows.png" os="windows2012"/>
  </metadata>
  <memory unit='KiB'>2097152</memory>
  <currentMemory unit='KiB'>1048576</currentMemory>
  <memoryBacking>
    <nosharepages/>
  </memoryBacking>
  <vcpu placement='static'>1</vcpu>
  <cputune>
    <vcpupin vcpu='0' cpuset='2'/>
  </cputune>
  <resource>
    <partition>/machine</partition>
  </resource>
  <os>
    <type arch='x86_64' machine='pc-i440fx-2.11'>hvm</type>
    <loader readonly='yes' type='pflash'>/usr/share/qemu/ovmf-x64/OVMF_CODE-pure-efi.fd</loader>
    <nvram>/etc/libvirt/qemu/nvram/1a4de10e-89f9-46a4-421b-8af680589e34_VARS-pure-efi.fd</nvram>
  </os>
  <features>
    <acpi/>
    <apic/>
    <hyperv>
      <relaxed state='on'/>
      <vapic state='on'/>
      <spinlocks state='on' retries='8191'/>
      <vendor_id state='on' value='none'/>
    </hyperv>
  </features>
  <cpu mode='host-passthrough' check='none'>
    <topology sockets='1' cores='1' threads='1'/>
  </cpu>
  <clock offset='localtime'>
    <timer name='hypervclock' present='yes'/>
    <timer name='hpet' present='no'/>
  </clock>
  <on_poweroff>destroy</on_poweroff>
  <on_reboot>restart</on_reboot>
  <on_crash>restart</on_crash>
  <devices>
    <emulator>/usr/local/sbin/qemu</emulator>
    <disk type='file' device='disk'>
      <driver name='qemu' type='raw' cache='writeback'/>
      <source file='/mnt/user/domains/windows/vdisk1.img'/>
      <backingStore/>
      <target dev='hdc' bus='virtio'/>
      <boot order='1'/>
      <alias name='virtio-disk2'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x05' function='0x0'/>
    </disk>
    <controller type='usb' index='0' model='ich9-ehci1'>
      <alias name='usb'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x07' function='0x7'/>
    </controller>
    <controller type='usb' index='0' model='ich9-uhci1'>
      <alias name='usb'/>
      <master startport='0'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x07' function='0x0' multifunction='on'/>
    </controller>
    <controller type='usb' index='0' model='ich9-uhci2'>
      <alias name='usb'/>
      <master startport='2'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x07' function='0x1'/>
    </controller>
    <controller type='usb' index='0' model='ich9-uhci3'>
      <alias name='usb'/>
      <master startport='4'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x07' function='0x2'/>
    </controller>
    <controller type='pci' index='0' model='pci-root'>
      <alias name='pci.0'/>
    </controller>
    <controller type='virtio-serial' index='0'>
      <alias name='virtio-serial0'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x04' function='0x0'/>
    </controller>
    <interface type='bridge'>
      <mac address='52:54:00:f9:53:80'/>
      <source bridge='br0'/>
      <target dev='vnet5'/>
      <model type='virtio'/>
      <alias name='net0'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x03' function='0x0'/>
    </interface>
    <serial type='pty'>
      <source path='/dev/pts/6'/>
      <target type='isa-serial' port='0'>
        <model name='isa-serial'/>
      </target>
      <alias name='serial0'/>
    </serial>
    <console type='pty' tty='/dev/pts/6'>
      <source path='/dev/pts/6'/>
      <target type='serial' port='0'/>
      <alias name='serial0'/>
    </console>
    <channel type='unix'>
      <source mode='bind' path='/var/lib/libvirt/qemu/channel/target/domain-51-windows/org.qemu.guest_agent.0'/>
      <target type='virtio' name='org.qemu.guest_agent.0' state='disconnected'/>
      <alias name='channel0'/>
      <address type='virtio-serial' controller='0' bus='0' port='1'/>
    </channel>
    <input type='tablet' bus='usb'>
      <alias name='input0'/>
      <address type='usb' bus='0' port='1'/>
    </input>
    <input type='mouse' bus='ps2'>
      <alias name='input1'/>
    </input>
    <input type='keyboard' bus='ps2'>
      <alias name='input2'/>
    </input>
    <graphics type='vnc' port='5905' autoport='yes' websocket='5705' listen='0.0.0.0' keymap='fr-ca'>
      <listen type='address' address='0.0.0.0'/>
    </graphics>
    <video>
      <model type='qxl' ram='65536' vram='65536' vgamem='16384' heads='1' primary='yes'/>
      <alias name='video0'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x02' function='0x0'/>
    </video>
    <memballoon model='virtio'>
      <alias name='balloon0'/>
      <address type='pci' domain='0x0000' bus='0x00' slot='0x06' function='0x0'/>
    </memballoon>
  </devices>
  <seclabel type='dynamic' model='dac' relabel='yes'>
    <label>+0:+100</label>
    <imagelabel>+0:+100</imagelabel>
  </seclabel>
</domain>

 

Issue is fixed, I used the Windows 7 model instead. The only noticeable difference I saw between both models is the BIOS being set to SeaBIOS. All in all pretty weird issue.