does libvirt make a user pay penalty, even if only a small amount,
for
using it when compared to raw qemu-kvm command line?
Not that I know of, except that the libvirt daemon uses a few additional
CPU cycles. Technically yes, in the spirit of the question no. Have a
look at your process tree; you'll see command lines in the same way as
you'd expect them to be when you start machines manually.
if it does where the overhead goes? quest or host, or maybe both?
No additional CPU cycles for the guest, a few additional CPU cycles for
the host to get status information and expose it via the daemon.
if overall performance is slower then how small it is comparing to
all
the advantages it offers?
It is completely negligible.
Felicitus