You’ll get display server issues if you try to install Ubuntu v7.10 in Parallels. But the Parallels Tools CD does have drivers to fix those problems. This blog post, Ubuntu 7.10 Install Guide, helps you get past the display server issues long enough to get the OS installed, and then gives instructions on how to get the Parallels Tools installed.
It worked great. Instructions were very clear and the process was mildly simple.