Parallels and Windows XP/7 Question

I have been running Parallels 7 on an iMac (mid-2011) now running Mountain Lion and very happy.
I had originally installed Windows XP from my original DVD and everything works fine.
I also have an Windows 7 Upgrade disk and wanted to try that - but as a separate "virtual machine". In other words I did not want to (1) replace my Windows XP install for the time being and (2) did not want Windows XP/7 to run as a dual boot, I wanted them listed as separate "virtual machines" in Parallels.
Is this possible as the install does not go through. Error message is something about no bootable system disk being present. I assume I am getting this error because the DVD I am using is an "upgrade" disk?
If I can't use this DVD to install Win7 through the Parallels virtual machine interface what is my other options? If I install it by starting Windows XP first, I assume that even if I select the dual boot option during the install, this will not appear on Parallels' "virtual machine" list?
Any suggestions - aside from purchasing another "full" version of Windows 7. (It is not important enough to me to go through that expense.)
Thanks, Steve

 

Since it's only an upgrade disk, you can only use it to upgrade XP. I haven't used dual boot in Windows before, but if that is an option with the upgrade, then I'm guessing that when you boot the VM, you can hold a key combination and select which OS to boot, but they'd both be part of the same VM.

Steve

 

Strells, your response suggests that upgrading from winxp to win7 is supported. I, for example, have xp now and want to upgrade to win7 but would obviously prefer to buy an upgrade disc rather than a full version. Any problems with that in parallels 7?