I am looking to understand how other people have built clusters of KVM host servers. I am especially interested in how people solved the problem of having them automatically failover if one node dies?
I recommend reading this tutorial:
Looking at your blog post the thing you miss is a clustering solution like RHCS or Linux-HA.
You can try ovirt, which is the open source version of RHEV. http://www.ovirt.org/Home It does HA and live migration. It also supports some OpenStack parts.