Kernel panic, crash & now "disk read error" and no boot--any solution?

I was happily messing about with Parallels 4 and Win 7 and suddenly I got the dreaded Gray Screen of Death and the hold down power key and reboot notice. Now the VM won't boot -- I get the black DOS-like screen with Parallels (R) etc., the number, the memory etc., and finally

Network Bootrom is installed.
Trying to boot from SCSI drive 0...

A disk read error occurred
Press Ctrl+Alt+Del to restart

And that's the end. Rebooting just brings me back here. Closing, shutting down, rebooting the main machine, everything comes right back to here. This is a VM on OSX 10.6 using Parallels 4.

And a mess.

Is it blown up beyond recognition or is there some way outta here?

Thanks.

 

bump.

a little help with this?

total loss or is there a way out?