Parallel Desktop 7: Windows7 - Bootcamp: Out of disk space

Details are:

2011 iMac with a 500 GB disk. (150GB free)
When we bought the iMac I migrated everything over including the Parallel 7 virtual machine for Windows XP which works fine.

I have purchased Windows 7 Ultimate and installed it via BootCamp into a 50GB partition which works fine (25GB free). I asked Parallels to created a virtual machine for this Bootcamp environment which it seems to have done, however when I try to start the Win7/Bootcamp from Parallels, I get the following error: Out of disk space (iMac has 150GB free)

(I also have a Mac Book Pro and have recently installed Win7 via bootcamp and Parallels 7 has created a working virtual machine without a problem.)

My guess is that some virtual environment file is missing, all advice welcome.

Thanks in advance