Here is how I got Ubuntu 7.10 installed and working on my parallels virtual machine, as taken from this post
VM Memory: 512 HD size 6-10GB
1. Boot the install CD. When the menu screen comes up press F6 for boot options before it starts the install
2. Delete the ’splash’ option and press the Return key to start up the installation. This will prevent the terminal window from being hidden by a splash screen so you can do the next steps.
3. The install system will begin to boot and the display server will die as before. However now it will go back and forth between the graphic display window and the terminal window. During the moments that it is in the terminal window you can type to the command shell. If it comes up with the window that says ‘The display server has been shut down about 6 times in the last 90 seconds’ go ahead and type Return to select the OK and you will again get the terminal window and in a few minutes get the dying display server again. Persevere and you can keep typing thing in the terminal window.
4. First type ctrl-c to kill the script and get you a shell prompt. Then using vi or pico as you prefer, edit xorg.conf as root:
sudo pico /etc/X11/xorg.conf
5. Scroll down to the Device section (not Input Device), and insert inside it the line
Option “LVDSBiosNativeMode” “false”
then save the file and exit the editor.
6. Start up the display server again by typing the command
This will bring up a window filled with a grey pattern. Have patience and wait, and in a minute or two you will get a real Ubuntu desktop with an Install icon on it. Double-click the Install icon to start up the install process.
7. The display server error will keep happening, but the install continues anyway. Whenever you get the ‘The display server has been shut down about 6 times in the last 90 seconds’ window you have to type Return again to get back to the install window. It is really annoying having to do that every few minutes, but eventually the install is completed.
8. However you are not yet done. If you reboot after the installation (remember to disconnect the install CD) you will still get that display server death problem. The next steps are to get rid of that:
9. Reboot the virtual machine and when it says to press ESC to get the boot menu, quickly press ESC to get the boot menu, scroll down, and boot in recovery mode. That gives you a root shell prompt in a terminal window.
10. Type the appropriate keys to get your mouse back and in Parallels’ Actions menu select Install Parallels Tools. That will show you instructions on how to install the tools, and will connect the tools CDROM image.
11. At the root shell prompt, type the commands that you were shown to install the tools
shutdown -r now
12. That last command reboots the virtual machine. When it comes back you should have a working Ubuntu 7.10