Sounds like it would be best for QEMU itself to refuse to accept the 'migrate' command if it is paused in EIO, and have it fail an ongoing migration if EIO occurs. Doing it in libvirt is somewhat racy since event notifications are asynchronous.

The support for canceling ongoing migration was committed upstream a while ago in commits:

commit 5379bb0f33f1529f530a40958a10e8f02eb868bb
Author: Peter Krempa <pkrempa>
Date:   Wed Jun 12 16:11:22 2013 +0200

    migration: Don't propagate VIR_MIGRATE_ABORT_ON_ERROR
    
    This flag is meant for errors happening on the source of the migration
    and isn't used on the destination. To allow better migration
    compatibility, don't propagate it to the destination.

commit cf6d56ac433273b7e4e087bb861ebced0680cec3
Author: Peter Krempa <pkrempa>
Date:   Wed Jun 12 16:11:21 2013 +0200

    migration: Make erroring out on I/O error controllable by flag
    
    Paolo Bonzini pointed out that it's actually possible to migrate a qemu
    instance that was paused due to I/O error and it will be able to work on
    the destination if the storage is accessible.
    
    This patch introduces flag VIR_MIGRATE_ABORT_ON_ERROR that cancels the
    migration in case an I/O error happens while it's being performed and
    allows migration without this flag. This flag can be possibly used for
    other error reasons that may be introduced in the future.

commit 5f719f217ebf89668ca3c404e4b8288179c26c92
Author: Peter Krempa <pkrempa>
Date:   Mon Jun 10 16:30:48 2013 +0200

    qemu: Forbid migration of machines with I/O errors
    
    Such machine can't be successuflly migrated unles the I/O error has
    recovered and might lead to data corruption. Forbid this kind of
    migration.

commit caa467db626c8691d993e8e15d2cbb0bb043312c
Author: Peter Krempa <pkrempa>
Date:   Mon Jun 10 16:05:45 2013 +0200

    qemu: Cancel migration if guest encoutners I/O error while migrating
    
    During a live migration the guest may receive a disk access I/O error.
    In this state the guest is unable to continue running on a remote host
    after migration as some state may be present in the kernel and not
    migrated.
    
    With this patch, the migration is canceled in such case so it can either
    continue on the source if the I/O issues are recovered or has to be
    destroyed anyways.

verify with build :
libvirt-0.10.2-21.el6.x86_64

step:
 1:prepare two machine,source and target
 2:create a guest on source with shared nfs 
 
 test one:
 do migration after guest EIO:
 pause guest with I/O error
 #virsh domstate $guest --reason
 paused (I/O error)

 # virsh migrate --live spice qemu+ssh://10.66.106.31/system --verbose --unsafe
root.106.31's password: 
error: cannot open file '/var/lib/libvirt/migrate/xuzhang-Graph.img': Input/output error
 check guest state
 # virsh domstate $guest --reason
 paused (I/O error)
 check target, no guest exist

 test two:
 during migration guest receive EIO:
 # virsh domstate spice
 running
 do migration
 # virsh migrate --live spice qemu+ssh://10.66.106.31/system --verbose --unsafe
root.106.31's password: 
 before migration finished, stop nfs server
Migration: [ 96 %]error: Unable to read from monitor: Connection reset by peer
the job stoped, check guest state
# virsh domstate spice --reason
paused (I/O error)
 check target, no guest exist. worked as expect, move to verified.

Since the problem described in this bug report should be
resolved in a recent advisory, it has been closed with a
resolution of ERRATA.

For information on the advisory, and where to find the updated
files, follow the link below.

If the solution does not work for you, open a new bug report.

http://rhn.redhat.com/errata/RHBA-2013-1581.html