The 2.6.32-29.58 kernel update that recently was pushed out lacks the 
virtio-net napi patch.
I updated my PPA against the updated kernel.
https://launchpad.net/~nutznboltz/+archive/lucid-virtio-napi

The updated PPA is still compiling; ETA Mar 2, 2011 02:40:00 UTC

To test with my PPA run:
sudo apt-get install python-software-properties
sudo apt-add-repository ppa:nutznboltz/lucid-virtio-napi
sudo apt-get update
sudo apt-get upgrade
sudo reboot

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https://bugs.launchpad.net/bugs/579276

Title:
  Lost network in KVM VM / virtio_net page allocation failure

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