Test with kvm-83-105.el5_4.12 , Problem seems still exist.

Step:
1. create a local nfs server in host, then
mount localhost:/root/test-nfs /mnt -o rw,soft,timeo=1,retrans=0

2. start guest:
/usr/libexec/qemu-kvm -rtc-td-hack -no-hpet -usbdevice tablet -cpu qemu64,+sse2 -drive file=/mnt/RHEL-Server-5.4-64-virtio.qcow2,if=virtio,boot=on,format=qcow2,cache=off -smp 2 -m 2G -vnc :1 -net nic,macaddr=20:20:20:11:12:56,model=virtio,vlan=0 -net tap,script=/etc/qemu-ifup,vlan=0 -monitor stdio


3. in guest:
cd /

4. in host:
service nfs stop

5. In host dmesg:
nfs: server localhost not responding, timed out

6. In qemu monitor
(qemu)info status
VM status: running


7. in host:
service nfs start



Actual result:
Guest keeps running.
guest dmesg:
ext3_abort called.
EXT3-fs error (device vdb1): ext3_journal_start_sb: Detected aborted journal
Remounting filesystem read-only

I don't see where you actually told qemu to stop on error. werror=stop is missing from -drive.

Test with werror=stop in build kvm-83-105.el5_4.12 again, VM can stop on read errors.

steps:
Step:
1. create a local nfs server in host, then
mount localhost:/root/test-nfs /mnt -o rw,soft,timeo=1,retrans=0
cd /mnt
qemu-img create test-533390.qcow2 -f qcow2 10G


2. start guest:
/usr/libexec/qemu-kvm -rtc-td-hack -no-hpet -usbdevice tablet -cpu qemu64,+sse2 -drive file=RHEL-Server-5.4-64-virtio.qcow2,if=virtio,boot=on,format=qcow2,cache=off,werror=stop -smp 2 -m 2G -vnc :1 -net nic,macaddr=20:20:20:11:12:56,model=virtio,vlan=0 -net tap,script=/etc/qemu-ifup,vlan=0 -monitor stdio -drive file=/mnt/test-533390.qcow2,if=virtio,format=qcow2,cache=off,werror=stop


3. in guest:
fdisk /dev/vdb
mkfs.ext3 /dev/vdb1
dd if=/dev/vdb1 of=/dev/null


4. in host:
service nfs stop

5. In host dmesg:
nfs: server localhost not responding, timed out


Result:
In qemu monitor
(qemu)info status
VM status: paused

additional info:
after VM paused, it can be restored by inputting "c" in qemu monitor, and works fine.

steps:
1. in host:
service nfs start
2. In qemu monitor
(qemu)c

An advisory has been issued which should help the problem
described in this bug report. This report is therefore being
closed with a resolution of ERRATA. For more information
on therefore solution and/or where to find the updated files,
please follow the link below. You may reopen this bug report
if the solution does not work for you.

http://rhn.redhat.com/errata/RHSA-2009-1659.html