Which distro are you having trouble with? It's typically a pretty straightforward process. Some of the versions of Ubuntu have been troublesome, but there are a number of tutorials I can link you to if that's the case.
In Parallels I choose Linux and then Other Linux. I left every thing else at the defaults. Under CD/DVD-ROM options I picked Use Image File, and I pointed it at the iso file that I downloaded. It works great!
I don't know what the advantages are of using Ubuntu 7.10, or if there are any big differnces. 6.06 seemed to work well.
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