In the default configuration the vms cannot talk to other kvm created vms. I did a traceroute from one vm to another, while running tcpdump on my host's br0. The arp packets for both directions of communcations returned the same mac address. Needless to say, they couldn't talk to one another.

KVM was so close to making a simple to use bridged networking, they shouldn't have stopped where they did. Now I have to manually assign a mac address.