Description of problem:
I have a directory 'VM' in my home directory, and used this command to set the SELinux file contexts appropriately:

semanage fcontext -a -t virt_image_t '/home/twaugh/VM(/.*)?'

There is a file there, F11.img:

-rw-r--r--. root root system_u:object_r:virt_image_t:s0 F11.img

While attempting to install a guest in /home/twaugh/VM/F11.img I get a traceback:

==>
Unable to complete install '<class 'libvirt.libvirtError'> internal error unable to start guest: qemu: could not open disk image /home/twaugh/VM/F11.img

Traceback (most recent call last):
  File "/usr/share/virt-manager/virtManager/create.py", line 1489, in do_install
    dom = guest.start_install(False, meter = meter)
  File "/usr/lib/python2.6/site-packages/virtinst/Guest.py", line 628, in start_install
    return self._do_install(consolecb, meter, removeOld, wait)
  File "/usr/lib/python2.6/site-packages/virtinst/Guest.py", line 726, in _do_install
    self.domain = self.conn.createLinux(install_xml, 0)
  File "/usr/lib64/python2.6/site-packages/libvirt.py", line 1077, in createLinux
    if ret is None:raise libvirtError('virDomainCreateLinux() failed', conn=self)
libvirtError: internal error unable to start guest: qemu: could not open disk image /home/twaugh/VM/F11.img

'
<==

Same configuration worked in Fedora 11.

Version-Release number of selected component (if applicable):
libvirt-0.7.0-3.fc12.x86_64
virt-manager-0.8.0-1.fc12.noarch

How reproducible:
100%