We have detected an ionized nebula around the hot DO white dwarf KPD 0005+5106, and used the [OIII]/H-alpha ratios and nebular velocities to separate this nebula from the background HII region of AO Cas. The angular size of the [OIII] nebula of KPD 0005+5106 is ~3 deg. The velocity of this nebula is similar to those of the local interstellar HI gas and the interstellar/circumstellar absorption lines in UV spectra of KPD 0005+5106, but has a large offset from those of the stellar photospheric lines. The mass of the ionized nebula, ~70 Msun, indicates that it consists of interstellar material and that the velocity offset between the star and the ambient medium should not be interpreted as a wind outflow. We have also analyzed the ROSAT PSPC observation of KPD 0005+5106 to determine its hard X-ray luminosity. Using the L_X/L_bol relation for late-type stars and the lack of obvious near-IR excess of KPD 0005+5106, we exclude the possible existence of a binary companion with coronal activity. Without a wind outflow, the presence of stellar OVIII emission requires that X-rays at energies greater than 0.871 keV are present in the vicinity of KPD 0005+5106. This hard X-ray emission is most puzzling as neither photospheric emission at such high energies nor a high-temperature corona is expected from current stellar atmospheric models of KPD 0005+5106. X-ray observations with high angular resolution and sensitivity are needed to confirm the positional coincidence and to enable X-ray spectral analyses for constraining the physical origin of the hard X-ray emission from KPD 0005+5106.