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I have used the virt-manager and created the QCOW image and installed the required packages (cloud-init). After that I added following entry which prevent adding route which causes the issue of prevent accessing metadata service earlier. Uploaded to the glace and work fine except could not find tools to grow the disk according to the selected flavor. (As I found from RHEL 6.x there are tools available , but not for RHEl 5.x)

echo "NOZEROCONF=yes" >> /etc/sysconfig/network