We are having the same issue right now, we built CentOS 6.2 64-bit from an ISO image, I try to snapshot it as a baseline image and I get the following:
2012-07-12 10:10:04 AUDIT nova.compute.manager [req-86422db7-f199-4870-a1b6-66cd26a27c43 b814182cb2ef4649add2f4194401cb8e 35dd40c123c74d90841c9802b1061229] instance 80aa96a7-405e-4231-a91a-ac8ca943541a: snapshotting
2012-07-12 10:11:09 WARNING nova.compute.manager [-] Found 1 in the database and 0 on the hypervisor.
2012-07-12 10:11:11 INFO nova.virt.libvirt.connection [-] Compute_service record updated for artim-cloud01.td.teradata.com 
2012-07-12 10:11:11 INFO nova.compute.manager [-] Updating host status
2012-07-12 10:11:15 ERROR nova.rpc.amqp [req-86422db7-f199-4870-a1b6-66cd26a27c43 b814182cb2ef4649add2f4194401cb8e 35dd40c123c74d90841c9802b1061229] Exception during message handling
2012-07-12 10:11:15 TRACE nova.rpc.amqp Traceback (most recent call last):
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/rpc/amqp.py", line 253, in _process_data
2012-07-12 10:11:15 TRACE nova.rpc.amqp     rval = node_func(context=ctxt, **node_args)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/exception.py", line 114, in wrapped
2012-07-12 10:11:15 TRACE nova.rpc.amqp     return f(*args, **kw)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/compute/manager.py", line 183, in decorated_function
2012-07-12 10:11:15 TRACE nova.rpc.amqp     sys.exc_info())
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib64/python2.6/contextlib.py", line 23, in __exit__
2012-07-12 10:11:15 TRACE nova.rpc.amqp     self.gen.next()
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/compute/manager.py", line 177, in decorated_function
2012-07-12 10:11:15 TRACE nova.rpc.amqp     return function(self, context, instance_uuid, *args, **kwargs)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/compute/manager.py", line 952, in snapshot_instance
2012-07-12 10:11:15 TRACE nova.rpc.amqp     self.driver.snapshot(context, instance_ref, image_id)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/exception.py", line 114, in wrapped
2012-07-12 10:11:15 TRACE nova.rpc.amqp     return f(*args, **kw)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/virt/libvirt/connection.py", line 708, in snapshot
2012-07-12 10:11:15 TRACE nova.rpc.amqp     image_format)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/virt/libvirt/utils.py", line 223, in extract_snapshot
2012-07-12 10:11:15 TRACE nova.rpc.amqp     execute(*qemu_img_cmd)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/virt/libvirt/utils.py", line 35, in execute
2012-07-12 10:11:15 TRACE nova.rpc.amqp     return utils.execute(*args, **kwargs)
2012-07-12 10:11:15 TRACE nova.rpc.amqp   File "/usr/lib/python2.6/site-packages/nova/utils.py", line 243, in execute
2012-07-12 10:11:15 TRACE nova.rpc.amqp     cmd=' '.join(cmd))
2012-07-12 10:11:15 TRACE nova.rpc.amqp ProcessExecutionError: Unexpected error while running command.
2012-07-12 10:11:15 TRACE nova.rpc.amqp Command: qemu-img convert -f qcow2 -O iso -s 115b87f7c3d74374bb9d926e9b7971a7 /var/lib/nova/instances/artim-cloud-instance-0000001a/disk /tmp/tmplv5E0Y/115b87f7c3d74374bb9d926e9b7971a7
2012-07-12 10:11:15 TRACE nova.rpc.amqp Exit code: 1
2012-07-12 10:11:15 TRACE nova.rpc.amqp Stdout: ''
2012-07-12 10:11:15 TRACE nova.rpc.amqp Stderr: "qemu-img: Unknown file format 'iso'\n"
2012-07-12 10:11:15 TRACE nova.rpc.amqp 

Also kvm restarted the machine but dashboard, nova list, and euca-describe-instances still shows the machine as "shut off"

[root@artim-cloud01 nova]# euca-describe-instances 
RESERVATION	r-jqgr8cur	35dd40c123c74d90841c9802b1061229	default
INSTANCE	i-0000001a	ami-00000005	server-26	server-26	shutoff	key (35dd40c123c74d90841c9802b1061229, artim-cloud01.td.teradata.com)	0		m1.small	2012-07-12T13:43:09.000Z	nova	

[root@artim-cloud01 nova]# nova list
+--------------------------------------+-----------+---------+----------------------+
|                  ID                  |    Name   |  Status |       Networks       |
+--------------------------------------+-----------+---------+----------------------+
| 80aa96a7-405e-4231-a91a-ac8ca943541a | Server 26 | SHUTOFF | private=172.65.184.4 |
+--------------------------------------+-----------+---------+----------------------+