It's fairly simple.
1. Create a new VM and choose "Create a typical VM (recommended)".
2. Choose Windows as your Guest Type OS and Windows Vista (experimental) as the Guest OS Version.
3. Click Next.
4. Click Finish.
5. Allow the VM to be created automatically.
6. Click on CD/DVD-ROM 1 which will bring up the Configuration Editor.
7. if your RC1 installer is in the form of an .iso image file, otherwise, insert your install DVD into your drive. If an .iso file, choose "Use image file" under CD/DVD-ROM Options and then browse to the location of the .iso file, then select OK to close the Configuration Editor. If you have a physical DVD, make sure you have "Connect at startup" and "Enabled" are selected.
7. From the VM menu, select "Power On". Your VM will boot either from the image file or from the physical DVD. From there on, follow the RC1 installation prompts.
8. After installing RC1, if you used an image file, go back to the Configuration Editor and change the CD/DVD emulation option to "Use CD/DVD-ROM" instead of the image file. Next time you start Vista, your installer will no longer be mounted.
9. Install Parallels Tools once Vista is up and running. When it asks you to reboot, don't. Go to Vista's Device Manager and update the drivers for mouse and video from the Parallels Tools image, which will still be mounted after you installed the Tools. If you reboot that image will be lost and you'll have to remount it by connecting it from the Devices menu. You select CD/DVD 1 and connect to the tools image.
10. You're done!