Recently upgraded from API 16 to 17. Has been retaining all AVDs that were added before and they were working fine after the upgrade too. But today I deleted all old AVDs and added few new ones, each with each device specification available. Earlier, the booting time was around 5 minutes for AVDs with recent versions (4.1.2) and around 2 minutes for AVD with 2.3.3. But now, AVDs with 4.1.2 or 4.2.2 takes 10 to 15 minutes to boot. Moreover, it fails to load launcher. When I touch on the launcher button on the Home screen, it loads the list of Apps and displays a usage tip, "To add an app to your Home screen, touch & Hold it" over it. So far expected. But touching on "OK" for this tip leads to "Unfortunately, Launcher has stopped" error. Not touching on anything leads me back to the home screen.
Tried unchecking AVD options, "Hardware keyboard present" and "Display a skin with hardware controls". Still the issue remains.
It was a memory issue. Problem fixed on incrementing the default value of VM heap by a factor of 16. (16 to 32 and 32 to 48).