After a week of attempting this I decided to post a summary of my experience thus far. This is gonna be long, please bare with it.
I actually started over from scratch, installing Ubuntu 16.04 (stock kernel) instead of Kubuntu and had some success.
I detached the 390 through pci_stub and had to blacklist the radeon drivers in /etc/modprobe.d/blacklist.conf. Note that the blacklist did not work until the physical machine was shutdown completely, restarting after applying the blacklist did not work. Is this normal?
I then installed qemu-kvm, virt-manager and the latest unstable debian OVMF. Using the ovmf version in the Ubuntu repository causes the VM to take very long to start for me. Sorry did not document the versions....
I created the VM following both Alex Williamson's how to series (http://vfio.blogspot.com/2015/05/vfio-gpu-how-to-series-part-4-our-first.html) and TPC 010 videos (https://www.youtube.com/watch?v=JKtYRFPhmYE).
I was not able to get it to work with windows 7 or 8.1. The VM would just sit on the EFI screen without FS0 being mounted. Trying an Ubuntu OS instead actually starts up the boot process but when trying to install Ubuntu, it crashes out, still not sure what caused this.
I instead downloaded a copy of Windows 10 and that actually worked. It was able to boot from OS CD and install successfully. I had to use the virtIO drivers for win10 to see the HDD and then it was smooth sailing from there...until restart. The Win10 PC kept crashing on boot.
I realized I had to install the Windows 10 OS and all required virtIO drivers before attaching the PCI card to it. Once it was done in this sequence it worked and the display now came out through the DVI connection of the Monitor....Success!!!
I installed the AMD drivers and the Win10 VM then saw the R9 390 in the device manager. From here I had to switch from VNC to Spice to get audio.
With everything looking like it was working, I installed steam and tested Dead Island riptide. When I tried to switch the game from windowed to full-screen is when the new problem began. I ended up with a blank screen after switching to full-screen.
After some troubleshooting I noticed the VM was running in extended mode with 2 monitors, one as the console screen output from virt manager and the other as the physical monitor with DVI connection. Again is this normal?
After messing around with it, windows crashed and I had to force off the VM,
After this windows 10 crashed on the "your PC/ Device needs to be repaired screen" where none of the provided options works. Not sure if this is an actually windows crash or something related to the VM.
And that's basically where I am at with this setup at the moment.
I noticed some strange thing about my machine when attempting this. Hopefully someone with experience can chime in:
I cannot install Ubuntu or any Linux OS for that matter with the R9 390 installed in the 4x PCI slot. The OS crashes right after selecting the Install or Try Ubuntu options. It seems to crash right after attempting to load the USB devices.
I then tried to switch IOMMU off, on the board and re-attempt the installation. At this point it actually loads up properly and I am presented with the first screen of the GUI to start the installation. Everything looks normal now, except no USB devices work so no mouse or keyboard.
I actually had to remove the 390, install Ubuntu, then reinstall the 390. This seems very strange, problem with the motherboard maybe?
Also with the 390 in the 4x slot now, after Ubuntu has been installed I see a AMD VI completion loop timeout" message being repeated until Ubuntu boots.