I'm not sure what I did and I can't seem to find the option to disable it, but for some reason parallels is ignoring any commands that I type that are meant for OSX. Like switching desktops with virtue, or when I command-tab normallly it would show my osx apps running, but that isn't happening anymore. Any idea what might have cuased this? I have to go out of fullscreen mode to be able to switch desktops.
N/M found the solution here: http://forums.cocoaforge.com/viewtopic.php?p=72781&sid=d2f55c9c74683aff0026283a34396885
Perfect! Thanks for the tip! Simply de-checking "Enable access for assistive devices" in the Universal Access system preference did the trick. Now VirtueDesktops works properly (because Parallels listens to Mac OS X commands again I guess).