Hi Jim,
So there I was having a lovely time doing the seL4 Tutorials...and I got hit with debug output #1 below, so I confirmed that I indeed had nested virtualization working by making an running an Ubuntu VM in side of an Ubuntu VM on an Ubuntu box in using kvm and qemu, so I do not think it is that. I tried passing the host processor through just to see if there something was getting in the way to no avail.
I took a look at the debug output and it looks like there's something funny going on with the kernel and the VMM. I was able to replicate your issue using the manifest available on GitHub, but it was working fine using our internal manifests. So I suspect there were probably fixes that haven't been propagated to GitHub yet via our internal CI processes.
I'll take a look at why our CI haven't propagated changes to GitHub and in the meantime, I've created a fork[1] on GitHub of our internal tutorial manifest so you can use that instead.
[1] https://github.com/nomadeel/sel4-tutorials-manifest
Hope this helps, Damon