I've set sasl-auth for my servers to make use of sso. As found there are incompatible changes to the sasl-part as found in libvirt and qemu, making it impossible for virt-viewer to connect to vnc-sessions build up by libvirtd. Same applies for virt-manager.

Since it works with libvirtd, kvm-qemu on debian, I suppose it's a bug within libvirtd, kvm-qemu as used with Ubuntu precise.

Switching off sasl auth for vnc is a crude workaround.

Versions found on Ubuntu 12.04:
ii  grub-firmware-qemu                   1.99-21ubuntu3                           GRUB firmware image for QEMU
ii  kvm                                  1:84+dfsg-0ubuntu16+1.0+noroms+0ubuntu13 dummy transitional package from kvm to qemu-kvm
ii  kvm-ipxe                             1.0.0+git-3.55f6c88-0ubuntu1             PXE ROM's for KVM
ii  libvirt-bin                          0.9.8-2ubuntu17                          programs for the libvirt library
ii  libvirt0                             0.9.8-2ubuntu17                          library for interfacing with different virtualization systems
ii  python-libvirt                       0.9.8-2ubuntu17                          libvirt Python bindings
ii  qemu-common                          1.0+noroms-0ubuntu13                     qemu common functionality (bios, documentation, etc)
ii  qemu-kvm                             1.0+noroms-0ubuntu13                     Full virtualization on i386 and amd64 hardware
ii  qemu-utils                           1.0+noroms-0ubuntu13                     qemu utilities
ii  ubuntu-virt-server                   1.3                                      Common packages necessary for hosting virtual machines
ii  virt-top                             1.0.6-1                                  show stats of virtualized domains
ii  virt-what                            1.11-1                                   detect if we are running in a virtual machine
ii  virtinst                             0.600.1-1ubuntu3                         Programs to create and clone virtual machines

Versions found on Debian (testing):
ii  ipxe-qemu                          1.0.0+git-20120202.f6840ba-3 PXE boot firmware - ROM images for qemu
ii  kvm                                1:1.0+dfsg-11                dummy transitional package from kvm to qemu-kvm
ii  libvirt-bin                        0.9.11-2                     programs for the libvirt library
ii  libvirt0                           0.9.11-2                     library for interfacing with different virtualization systems
ii  qemu                               1.0.1+dfsg-1                 fast processor emulator
ii  qemu-keymaps                       1.0.1+dfsg-1                 QEMU keyboard maps
ii  qemu-kvm                           1.0+dfsg-11                  Full virtualization on x86 hardware
ii  qemu-system                        1.0.1+dfsg-1                 QEMU full system emulation binaries
ii  qemu-user                          1.0.1+dfsg-1                 QEMU user mode emulation binaries
ii  qemu-user-static                   1.0.1+dfsg-1                 QEMU user mode emulation binaries (static version)
ii  qemu-utils                         1.0.1+dfsg-1                 QEMU utilities
ii  virt-top                           1.0.6-1+b1                   show stats of virtualized domains