How do i copy my System into Parallels?
Yes you can.
Here is a post on the Parallels Forum that will show you how:
http://forum.parallels.com/showthread.php?113931-Convert-Physical-Lion-Drive-to-virtual

In a nutshell:

1) Clean up the system hard drive

2) Run Time Machine on a fresh drive

3) Created a new VM, using the Install Mountain Lion package.

4) The installer lets you use an existing Time Machine backup (actually, you pick the option that says "Existing Disk" or something like that, which also happens to work with Time Machine backups). This doesn't work, however, because it says the backup was from a different machine.

5) Let the ML Installer go through its paces. It asks again if I want to migrate existing data, and this time the Time Machine backup works just fine.

-OR-

Use Carbon Copy Cloner to make a .dmg of the original drive and do some juggling.