I shouldn't have used the term "broken packages". What I meant was it only upgrades what is on the disk so you are left with several packages that didn't get upgraded and usually have dependency problems that have to be sorted out. How many 3rd party RPMs you have installed usually determines how much of a dependency problem you'll have to deal with after an upgrade.
Yeah, KVM is what Fedora uses for virtualization out of the box. It provides basically the same thing that VMware or VirtualBox does except it's included with Fedora. This site is running on a KVM Guest (Virtual Machine) that is running a copy of Fedora 14. You can see the real time system stats from the guest's point of view here:
http://voidmain.kicks-ass.net/sysinfo/
Notice it's running the fc14 kernel (rc1 which I downloaded from the Bugzilla link). Also notice under the "Hardware" section it sees 2 CPUs and notice the model is "QEMU Virtual CPU" where normally you would see "Intel Pentium blah blah" or "AMD Athlon blah blah". You can also see all the other hardware items that it detects are virtual. Now the actual physical "host" that is a desktop (well, it's in a tower case actually) with an AMD Phenom 9500 quad core processor. It's a single CPU with 4 cores.
You can actually give your virtual machine more virtual cores than you have physical cores and it would thread the workload out across the physical cores although I am not sure it would be advantageous to do that. You can also limit which physical cores you want the guest to be able to use. Your guests do not have to run the same OS as the host (and in fact I have an XP instance running on this host as well as another Linux instance).
Here is a drawing I did of the same machine a couple of years ago when it only had the XP and one Fedora guests:
http://voidmain.is-a-geek.net/redhat/vlan/
I have since added this Web guest and moved this site into it. Notice the two guests are on two different network VLANs. I have a private VLAN zone (in green) that the XP guest is in and a DMZ VLAN zone (Yellow) that the mail server is in and the new web server also resides in the DMZ zone.