APPLIES TO:* Parallels Desktop 2.x for Mac
* Parallels Desktop 3 for Mac
Unfortunately Macbook Air CD/DVD drive “borrowing” feature doesn’t support direct media streaming and thus cannot be used to install Windows (or any other Guest OS ) to Parallels Virtual Machine. To install a Windows VM on Macbook Air you can either create an .iso image of Windows installation disk on some other computer with CD/DVD drive and copy it to Mac or use an external CD/DVD drive that Apple offers for Macbook Air.
Please refer to this article for the instructions on how to create an .iso image for Parallels VM on Mac - kb.parallels.com/en/4664