I have parallels 5 for Mac installed. I have a bootcamp installation of Windows XP. When I use the bootcamp installation I can see MPEG2 file movies thru Win Media player with no issues. When I use this bootcamp partition as a virtual machine is when the problem starts. The same Mpeg2 file movie will play but the video looks like a Old TV that's lost it's horizontal synch. Video looks distorted. Anyone with any ideas as of why is this happening? Thanks
Try deselecting the "Enable 3D acceleration" option in Parallels Desktop -> Virtual Machine -> Configure -> Hardware -> Video.