No Boot Disc Available Error, XP home & Parallels 4

I have bought parallels version 4 and trying to install XP Home on my iMac 10.5.6. I have installed Parallels and when to Express install and tried to install XP Home with the disc in the drive. I have made sure that the real drive is enabled in the config settings. When I went to start I got a "No boot Disc available'.

Following the adivce in the knowledge base I made an iso Disc image of the XP disc and tried to boot from that but still no joy.

Can anyone tell me where I am going wrong please?
 
Andrew Cetnarsky,

Are you sure it is not a Service Pack, or upgrade CD? Does it work on physical machines?
 
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