For a very long time we have wanted libvirt to not change the UID of qemu when libguestfs runs as root (eg: https://libguestfs.org/guestfs-faq.1.html#permission-denied-when-running-libguestfs-as-root https://bugzilla.redhat.com/show_bug.cgi?id=1045069).

Recently this has become possible. We need to add this to the libvirt domain XML when creating the appliance:

<seclabel type='static' model='dac' relabel='yes'>
  <label>+0:+0</label>
</seclabel>

The effect of this is that when you run libguestfs as root, qemu will also run as root, not as qemu.qemu.