There is a datasource that exist but No source PVC set, we get a wrong error about it. SourceRef is a right field to set 
Yeah so the issue is that in order to support sourceRefs in vm templates we need to get the datasource during VM creation to ensure it won't change later after validation. Since the datasource is empty, we can't proceed for security reasons and trigger an error instead  Attaching detailed yaml in additional info

4.16.4 and all versions are affected by it

always

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3.

$ oc get datasource sap-test  -n sap -o yaml
apiVersion: cdi.kubevirt.io/v1beta1
kind: DataSource
metadata:
  creationTimestamp: "2024-11-21T12:37:58Z"
  generation: 2
  labels:
    app.kubernetes.io/component: storage
    app.kubernetes.io/managed-by: cdi-controller
    app.kubernetes.io/part-of: hyperconverged-cluster
    app.kubernetes.io/version: 4.16.4
    cdi.kubevirt.io/dataImportCron: sap-test-import-cron-mbx4o7
    instancetype.kubevirt.io/default-instancetype: u1.large
    instancetype.kubevirt.io/default-preference: rhel.8
  name: sap-test
  namespace: sap
  resourceVersion: "1038679"
  uid: a50d0e69-2b04-4aa4-bcbb-a9e0ce2e3ea6
spec:
  source: {}
status:
  conditions:
  - lastHeartbeatTime: "2024-11-21T12:37:58Z"
    lastTransitionTime: "2024-11-21T12:37:58Z"
    message: No source PVC set
    reason: NoSource
    status: "False"
    type: Ready
  source: {}


VM Yaml 

apiVersion: kubevirt.io/v1
kind: VirtualMachine
metadata:
  annotations:
    kubemacpool.io/transaction-timestamp: '2024-11-21T12:38:16.69786808Z'
    kubevirt.io/latest-observed-api-version: v1
    kubevirt.io/storage-observed-api-version: v1
  resourceVersion: '1038964'
  name: rhel-8-copper-haddock-30
  uid: 61ec501d-acda-45be-956c-e01aec07e82f
  creationTimestamp: '2024-11-21T12:38:15Z'
  generation: 2
  managedFields:
    - apiVersion: kubevirt.io/v1
      fieldsType: FieldsV1
      fieldsV1:
        'f:spec':
          .: {}
          'f:dataVolumeTemplates': {}
          'f:instancetype':
            .: {}
            'f:name': {}
          'f:preference':
            .: {}
            'f:name': {}
          'f:running': {}
          'f:template':
            .: {}
            'f:metadata':
              .: {}
              'f:labels':
                .: {}
                'f:network.kubevirt.io/headlessService': {}
            'f:spec':
              .: {}
              'f:domain':
                .: {}
                'f:devices':
                  .: {}
                  'f:interfaces': {}
              'f:networks': {}
              'f:subdomain': {}
              'f:volumes': {}
      manager: Mozilla
      operation: Update
      time: '2024-11-21T12:38:15Z'
    - apiVersion: kubevirt.io/v1
      fieldsType: FieldsV1
      fieldsV1:
        'f:metadata':
          'f:annotations':
            'f:kubevirt.io/latest-observed-api-version': {}
            'f:kubevirt.io/storage-observed-api-version': {}
          'f:finalizers':
            .: {}
            'v:"kubevirt.io/virtualMachineControllerFinalize"': {}
        'f:spec':
          'f:instancetype':
            'f:revisionName': {}
          'f:preference':
            'f:revisionName': {}
      manager: virt-controller
      operation: Update
      time: '2024-11-21T12:38:16Z'
    - apiVersion: kubevirt.io/v1
      fieldsType: FieldsV1
      fieldsV1:
        'f:status':
          .: {}
          'f:conditions': {}
          'f:printableStatus': {}
          'f:volumeSnapshotStatuses': {}
      manager: virt-controller
      operation: Update
      subresource: status
      time: '2024-11-21T12:38:17Z'
  namespace: sap
  finalizers:
    - kubevirt.io/virtualMachineControllerFinalize
spec:
  dataVolumeTemplates:
    - metadata:
        creationTimestamp: null
        name: rhel-8-copper-haddock-30-volume
      spec:
        sourceRef:
          kind: DataSource
          name: sap-test
          namespace: sap
        storage:
          resources: {}
  instancetype:
    kind: virtualmachineclusterinstancetype
    name: u1.large
    revisionName: rhel-8-copper-haddock-30-u1.large-cdda4480-974e-4c10-b74c-94485e2f2fb3-1
  preference:
    kind: virtualmachineclusterpreference
    name: rhel.8
    revisionName: rhel-8-copper-haddock-30-rhel.8-b101dbd5-c93b-491b-aece-6e2ba15a1d1d-1
  running: true
  template:
    metadata:
      creationTimestamp: null
      labels:
        network.kubevirt.io/headlessService: headless
    spec:
      architecture: amd64
      domain:
        devices:
          interfaces:
            - macAddress: '02:df:21:00:00:05'
              masquerade: {}
              name: default
        machine:
          type: pc-q35-rhel9.4.0
        resources: {}
      networks:
        - name: default
          pod: {}
      subdomain: headless
      volumes:
        - dataVolume:
            name: rhel-8-copper-haddock-30-volume
          name: rootdisk
        - cloudInitNoCloud:
            userData: |
              #cloud-config
              chpasswd:
                expire: false
              password: ue2c-crpa-oxp5
              user: cloud-user
          name: cloudinitdisk
status:
  conditions:
    - lastProbeTime: '2024-11-21T12:38:17Z'
      lastTransitionTime: '2024-11-21T12:38:17Z'
      message: VMI does not exist
      reason: VMINotExists
      status: 'False'
      type: Ready
    - lastProbeTime: null
      lastTransitionTime: '2024-11-21T12:38:17Z'
      message: 'Error encountered while creating DataVolumes: DataVolume sourceRef not supported'
      reason: FailedCreate
      status: 'True'
      type: Failure
  printableStatus: Stopped
  volumeSnapshotStatuses:
    - enabled: false
      name: rootdisk
      reason: PVC not found
    - enabled: false
      name: cloudinitdisk
      reason: 'Snapshot is not supported for this volumeSource type [cloudinitdisk]'