Well thanks to the guys on Jaiku I have a better idea on why I was having problems installing Ubuntu 7.10 as a guest OS on Parallels.
I was given (and also found) some useful links.
How to install Ubuntu 7.10 (Gutsy Gibbon) in Parallels Desktop for OS X
How to install Ubuntu Desktop 7.10 in Parallels Desktop 3.0
I am currently downloading an alternative version of 7.10 and see if that will work.
Success
See https://www.technologystuff.co.uk/blog/?p=60
Basically using the text based installer (rather than use the Live CD installer) worked fine.