What OS are you trying to install?
I have been playing with this for a few days, installed Dos 6, Windows 3.1, Windows 95, Windows 98SE, Windows ME, and Windows 2000. I encountered a couple of problems, symptoms exactly like yours.
The only ones I had trouble with were Win95 and ME. After tinkering with them for a while, I got Win95 installed by installing DOS first then Win3.1 and upgrading. WinME Was a problem to start with, gave me similar trouble to that which you describe.... until I decided maybe I needed to format the virtual hard drive first, instead of having the installer do it as part of the install. That overcame the obstacle. The OS installed without a hitch after that.
Another quirk I discovered was clicking on "Action" then "Install or Update Virtual Machine Additions." That loads a virtual ISO image to your Virtual CD. If you did that (like I did):roll: you can't use the virtual CD for anything else until you unmount that image or release it. That's the other problem I discovered while trying to install ME.. got there in the end though.
Hope that helps...
HCJ