Parallels Stops at Hard Drive
I have no experience with this but please try the following:
If Mac is unable to read the CD, you may try to install from an .iso
image of the CD.
To create ISO image please take the following steps:
1. Insert the OS installation disc into the CD/DVD-ROM drive of your computer.
2. Start the Parallels Image Tool (applications/parallels/parallels image tool). Upon startup, the assistant displays the Welcome dialog. Click Next.
3. On the Choose Device Type dialog select the CD/DVD-ROM option and click Next.
4. On the CD/DVD-ROM dialog make sure the option Create a new ISO image of the CD/DVD disc is selected. Click Next.
5. On the Create New ISO Image of CD/DVD Disc dialog select the source device (CD/DVD-ROM drive on your Macintosh computer), and specify a destination folder and a name of the CD/DVD image file. Click Next.
6. On the Review Processing Options dialog, carefully review the settings (operation, source device, and destination file). If everything is correct, click the Start button to begin the operation.
7. While the operation is being performed, the Execution in progress dialog is displayed. Wait until the operation is completed.
8. After the disc image is created, the Execution Completed dialog appears.
Click the Exit button to close the assistant.
The disc image is created and placed in the destination folder specified in step 5
Now you should be able to connect this image to the Parallels Desktop
In the Configuration screen Edit> CD/DVD-ROM Options,
enable "Use Image File" option and select your file's destination in
the field below.
in Options Booting tab select
sequence as (CD-ROM, Hard Disk, Floppy.)
Start VM with the green start button
And install Linux as normal