Building a new Linux VM within Centos9 Stream VM in Parallels on Intel Mac

Hi folks,

I'm trying to learn how to setup KVM virtual machines and I bought Parallels Desktop 19 Pro Edition to use with my Intel Macbook Pro. I kept getting a kernel panic when installing the new Linux VM (also a CentOS9 Stream). My setup is:
1. Enable Parallels hypervisor with nested virtualization to set up a CentOS 9 Stream VM with 4 vCPU, 4GB memory, and 64 GB disk.
2. This CentOS 9 Stream VM is installed with the various kvm components (qemu-kvm qemu-img libvirt virt-install libvirt-client virt-manager). To verify kvm, I executed: lsmod | grep kvm
kvm_intel 442368 0
kvm 1335296 1 kvm_intel
irqbypass 16384 1 kvm

3. Cockpit and its other components are also installed to allow virtual machine management. I access Cockpit from Safari browser on my macbook pro.
4. A folder (called public with world readable permissions) is installed with permissions for Qemu. This folder contains the ISO image for CentOS 9 Stream.
5. In Cockpit virtual machines management, a virtual machine (2 vCPU, 2GB memory) is created. Encountered a kernel panic when the domain boots up.
Note that my macbook is connected via ethernet to reach Internet. The CentOS 9 Stream VM hosted in Parallels is able to access the Internet, and a virtual bridge has been created by default (virbr0) by parallels. I have tried to create the inner VM with both NAT (default) and Bridge interfaces, and both failed.

Can someone suggest how I could overcome this error?