Unable to Install Windows XP

My machine's setup is: MacBook with a 1.83 GHz Intel Core 2 Duo; OS X 10.4.10

I installed and started Parallels Desktop, and then I activated my copy correctly. I created a "typical" virtual machine. When I attempted to install Windows XP, I could not choose Default CD/DVD-ROM from the Devices menu (none were highlightable); and, when I clicked the Power On button, I got the following message:

"You need to restart your computer. Hold down the Power button for several seconds
or press the Restart button."

What am I doing wrong? Please advise. Thank you.