Here [1] is a great paper about
nested virutalization for KVM. This combines hardware capabilities with software tricks to allow running multiple levels of VMMs. It may not have intense IOPs testing but it's got a couple benchmarks that would be representative of real-world workloads. Keep in mind that this paper was published in 2010 and virtualization performance has been on a dramatic rise the last several years.
Jump to the results section. The more relevant bullets here are 'single guest' (either virtio or using direct mapping).
Highlights (or lowlights, depending on your perspective):
kernbench - 9.5% overhead
SPECjbb - 7.6% overhead
I don't agree with your point about suboptimal allocation of hardware resources. Virtualization does not require you to divide a machine in a different way than processes do (you could easily have one VM consume nearly all CPU cycles, one consuming nearly all I/O capacity, etc.) IMO, the key difference is that virtualization lets you easier establish hard, enforceable limits and concrete policies around resource usage (not to mention the ability to account for usage across all kinds of different applications and users). And, it lets you do that for arbitrary applications on arbitrary operating systems. So users don't have to write to one particular framework/language/runtime/OS whatever. That's all pretty important for large scale.
[1] http://static.usenix.org/event/osdi10/tech/slides/ben-yehuda...