If Parallels is unable to use the hard disk, try the following:
right-click on winxp.hdd and select option "Show package content".
If there is only one .hds file inside, just drag it out of the winxp.hdd (I hope you did a backup as suggested), then delete now almost empty winxp.hdd and rename the .hds file to winxp.hdd.
When done, try again step 3 from my previous reply.
Updated:
If you have attached it successfully - try step 4, Windows repair.
Last edited: Apr 17, 2009