Option #2
1) Update your C:\WINDOWS\system32\drivers\etc\hosts file so that any domains you want to point to your DNN install point to 127.0.0.1 same as local host does.  So using the example above you would have 3 entries

127.0.0.1 localhost
127.0.0.1 Parent1.com
127.0.0.1 Parent2.com

2) Create new parent web site using one of the domains you created an entry for in step #1.

3) You will still get an error when you try to access the site using the new domain.

** At this point you will stil get an error that you cannot access the site.  The reason for this is the new parent domain point to the root of the default web site and not the DNN virtual directory.  So you need to take additional steps to get this to work.

4) Access site using the original URL and login as host.

5) Go to Host / Portals and edit each portal.  At the bottom of the screen you will see the alias you created the new Parent with (Parent1.com, Parent2.com, etc).  So it access the DNN directory you would need to edit the alias and add the DotNetNuke_2 virtual directory (Parent1.com/DotNetNuke_2, Parent2.com/DotNetnuke_2, etc)