Yes, sorry, I fully expect that's what they're doing -- I was really writing two replies there --
1) You don't have to pass PCIe through to hardware to get performance that makes it look like you have.
2) We know they're offloading though, so here's what I think it looks like.
"but the latest generation EC2 instances offload networking and storage processing to hardware. This is the case for both for instances that use Xen and C5 that uses the new KVM-based hypervisor."
So that seems to confirm an offload to hardware for storage.