Thanks.
I tried to make a dmg with Disk Utility twice and it failed. In the meantime I was downloading the Parallels demo. I saw a smudge on the DVD that looked like a small scratch, so I wiped it off. Then I installed on Parallels from the physical disk with no issues. I tried again installing on Fusion 5 from the physical disk: no dice. Finally I tried again to make the dmg and it worked and I was able to install from that on Fusion. I think the other poster is correct, it is actually faster to make a DMG then install from that... installing from the physical DVD involves a lot of seeking that makes irritating noises.
In other news, I also had trouble installing the software I wanted to run on Snow Leopard Server (from a physical DVD). I had to restart the VM and try again twice before it finally worked. Again, Parallels worked right the first try.
I started this process leaning heavily towards Fusion because I've used it before and because Parallels seems to focus so heavily on Windows it's hard to find information on other guests. But I'm sure it is possible to use unixy guests, so now I'm leaning towards it cause it just seems to work better.
By the way IMO the only thing crazy about the $20 price for Snow Leopard Server is how long it took for Apple to address the needs of Rosetta users. I guess you must have paid hundreds of bucks for it. Sorry about that. ;-)