I bought my wife a new iMac last week, in part to use Windows and a specific Windows application that she works with occasionally, and to get rid of the aging PCs we have for that purpose. I wanted to install Parallels, and tried doing so with a version of XP Home that I had on one of our PCs. I tried on her iMac, but the Windows installer kept rebooting shortly after it started. It would start the installation, then restart to the black screen, the restart the installation, and so on. I then tried the same thing on my Mac Pro, to no success.
Nothing on the Parallels web site provided any solution, nor did a post to the forum. But today, a colleague told me that he had a similar problem installing Vista in Parallels on a Mac that only had 512 MB of RAM. Both the iMac and my Mac Pro have 2 GB RAM, so that didn't seem to be the problem.
So, I saw that there was an update to Parallels today. I downloaded it and tried again, but to no avail. Then I wondered if the RAM could be preventing the installation. After the installer rebooted, I shut down the virtual machine, then set its RAM to 1024 MB (by default, when running an "express" installation, Parallels allocates only 512 MB to the VM).
I then tried installing XP Home. At first, the installation went further than my previous tries, but then it stalled again. I ended up relaunching the VM and restarting the installation about ten times -- using the custom install method -- and finally got it to work, but in the process saw all kinds of errors: some related to memory (read or write errors), others saying certain drivers couldn't be found or installed, and one showing a blue screen with a lot of text, talking about a specific error which I just managed to get a screen shot of before Parallels switched back to the VM configuration screen. So, allocating more memory did work, but did not seem to resolve the problem entirely. Perhaps there's a sweet spot for memory that I didn't find?
Curiously, when I installed a first VM on my Mac Pro last year - with the previous release build of Parallels - I had no problem. I assume that something in this build is managing RAM differently. If you have this problem, try increasing the RAM during the installation; you can always lower it, if necessary, once the VM is set up. You may or may not have similar installation problems as I did--in fact, if others have had this problem, do mention it in the comments.
Mac OS X Hints
http://hints.macworld.com/article.php?story=20070312134243563