*** Caution *** be careful this can cause issues and data loss
When I see this screen at the start of the Server 2012 installation I do the following
Press Shift+F10
Diskpart
select disk 0
create partition primary size=150000
active
format fs=ntfs quick
exit
Then I continue with the installation
Where I got my info:
http://www.vmwareinfo.com/2010/09/creating-windows-2008-r2-server-without.html
http://superuser.com/questions/462657/avoiding-the-pesky-windows-7-system-reserved-partition