I'm afraid I can't help - I'm stuck a step earlier than that.
When I try to install Ubuntu 7.04 server from the i386 server ISO image, I get an error after the keyboard/locality setup saying linux could not detect a common CD-ROM drive.
Same problem using the full DVD ISO to install server. When trying to boot the live image off the DVD, I just get a black parallels window.
Did you have any trouble with these steps?
UPDATE:
Found a work-around here:
http://forum.parallels.com/showthread.php?p=56368#post56368
(change host type from Linux to Solaris during install to change CD-ROM emulation)
Last edited: Apr 20, 2007