Comment 27 for bug 105195

Start the vm with this command "change to suit your setup"

kvm -m 512 -hda winxp.qcow2 -cdrom xp_sp2.iso -boot d

As you can see, we're booting from a cdrom image.
During the windows install, you have a chance to choose the partition your installing to, then you choose to format that partition.
Right after the format, you can stop the installation and quit the vm.
Now you start the vm with virt-manager, booting from the cdrom and go thru the installation a second time. This time, you choose the partition you made but DO NOT FORMAT IT, choose "leave file system as it is". From there, it's a normal installation.

Note: If you finish the install from the kvm command rather than the virt-manager, windows will likely not boot thereafter from virt-manager. However, that's no problem, you can re-install over it WITHOUT formating. The virt-manager partitioning/formatting seems to be the issue..