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Let me explain it. The reason of having the authentication window is SLES has a more restrictive security policy than SLED. So to diminish the dialog, we need to relax the corresponding policy with proper security audit. This was dealt with https://bugzilla.suse.com/show_bug.cgi?id=1169540
However as you can see from bsc#1169540 , "puching a security hole" was not that preferrable through the audti. In the end, as a trade-off, we have a partly approved relax of policy, which only applies to GNOME local seat (a set of local display, mouse and keyboard). But the remote connection like VNC connection to the machine still has this more restrictive policy set.
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To answer the above question, connecting guest GNOME using QEMU VNC is different from connecting GNOME directly using the SUT system VNC.

With the former way, GNOME does not realize it is remotely connected and will assign the "local seat" to the QEMU emulated display, mouse and keyboard.

With the later way, GNOME knows it is remotely connected and the session process is a bit different. So a local seat is not assigned to the user, and in SLES, a more restrictive policy applies.
So I assume the s390x first_boot failure is probably hit by the latter case.

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