I have booted from a Firewire drive with Lion installed, then selected the recovery partition as per the instructions at http://kb.parallels.com/en/112121#1. When I get to the install location Parallels doesn't recognize any other attached drive except the now idle internal HD. I have tried a number of Firewire and USB combinations but it will ONLY see the internal drive. Is this a bug or a feature? Edit: It also can't see another partition on the same drive.
Are you talking about the Install location for Lion while the Lion installer is running? The Lion installer (while running in the virtual machine as a guest) only detects the partition on the virtual hard disk that Parallels created for the virtual machine. You're not supposed to see your host's partitions in the virtual machine unless you add Boot Camp type virtual hard disks to your virtual machine.
