How often is that how it is run?
Does it? Afaik libvirt requires AppArmor/SELinux for this.
It is nowhere near as comprehensive as SELinux isolation, as I clearly said way up there in my initial response -- which is also the reason why when you use Docker on RHEL, most of the security comes from the additional SELinux protections Red Hat have added.
But still, this is nowhere from a "a least-privilege container for each VM" as you suggested.
(I'm a heavy libvirt user myself - thank you for your work on it!)