After struggling a bit, I finally got RDO packstack working with a RHEL7 qcow2 image. I was able to get it working with three nodes, one controller and two compute nodes. I was able to boot a VM on each of the compute nodes and was able to ping between them. This was achieved via a Vxlan tunnel created between the two nodes.

One important thing about RDO is that I found it quite stable once I could get it working.