I found a bug while installing Windows 7 in Parallels 5 this morning. Windows installer stops and says only "There are no images available", and I could not see any way past this screen. So I went crawling around trying to figure this out. It seems a few folks have run into this kind of thing before with systems other than Parallels.
The solution in my case was to disable the virtual floppy drive by unchecking "Configure/Hardware/Floppy Disk/Connected". This is a MacBook and I don't have a floppy drive, and if I did there would certainly no Windows 7 images there.
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