Is KVM stable enough for production use in 2011?
Solution 1:
KVM for production is OK. Having a bunch of Windows and Linux VMs, including Remote Desktops, Databases (MS and MySQL), Router, Firewall, even Backups (guest to guest) and everything is running fine.
What I like about KVM is the ability to scale management layers. I actually prefer managing the lot I have without libvirt, adjusting (and learning about) every single parameter kvm/qemu accepts. Others use the libvirt based tools and if you need full scale cloud management, there's Open Stack and friends.
There are some settings to stay away from, though. Use the default cache=writethrough, do not enable native async, and stay away from qcow, qed or whatever file formats. Give your machines LVM volumes.
Solution 2:
I agree with dyasny as for stability, although I'm not sure the feature set of KVM compares with Xen/VMware/etc. at this point.
I know they have live migration with/without shared storage ("vMotion and Storage vMotion" in VMware parlance), but I'm not sure if they have HA/clustering and load balancing ("Distributed Resource Scheduler") or distributed switches ("Distributed vSwitch") at this point. What makes it tricky is that this could all change, search-wise, once the marketing drones get a hold of it.
Also, I would suspect that the centralized management is not quite there yet ("vCenter"), but again, you'd have to do more research or possibly even venture in development/beta versions to achieve these bits of functionality.
Hopefully someone with more KVM experience/knowledge can chime in here.