Now it works! I am able to bring up the Banshee3D editor in my Ubuntu 16.04 desktop and to do some basic editing using the editor.
These are the few things I did to resolve the time out issues:
1. Removed KVM and the VM GPU drivers.
2. Installed a NVIDIA GeForce GT 430 graphics card.
3. Installed the NVIDIA binary driver -- version 390.67.
The Nouveau display driver that comes with Ubuntu 16.04 does not work.
I got another "i965: Failed to submit batchbuffer: Input/output error" with this driver .