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What distinction does KVM or the kernel make for a single guest?

Is there a system that would allow for mapping part of an IO device (such as a block range or a LUN) to a guest when multiple guests are running with the same level of overhead?

I'm not sure I follow your question 100%, but I'm gonna take a stab...

The distinction being made here isn't for a single guest or multiple guests, it's for a single guest OS or nested guests (i.e. a VM running another VM). To expose the hardware virtualization extensions to the guest VMM, then they must be emulated by the privileged domain (host). There are software tricks that allow this emulation to happen pretty efficiently (and map an arbitrary level of guests onto the single level provided by the actual hardware). It's not a common use-case, but for a few very specific things it's very useful.

There are a few different ways to map I/O devices directly into domains. Some definitely allow for part of an I/O device. For example, many new network devices support SR-IOV -- which effectively allows you to poke it and create new virtual devices (which may be constrainted in some way) which can be mapped directly into guests.

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