I have been struggling for two days with the same issue. I also made a bootable DVD of Windows 7 64-bit from my student download. My observations:
1) I can get it to install fine under Boot Camp.
2) I try installing it under Parallels 4.0 (Build 3848) and get stuck on activation -- it says my product key is not valid.
However, through a highly-convoluted effort, I migrated my Boot Camp partition to Parallels and got it working (at least for a while and then I somehow broke it messing with the configuration). I am in the process of trying again.
So it does seem that 64-bit Windows 7 will run on Parallels...