Parallels 9 (and 8) not compatible with Mavericks "Displays have separate spaces"

My installation of Parallels 8 did not work well with Mavericks when "Displays have separate spaces" was enabled. So I upgraded to Parallels 9 (9.0.23136.932290) and found the problem to be worse! The Parallels window (full screen) appears off-screen and even if I try to move it on-screen it cannot be selected. I have to turn off "Displays have separate spaces" to get it to work. Of course if I do that I could just as well saved $50 and kept using Parallels 8. VMs here are Windows 7, XP, and 2000. (Yes I still use 2000 for some things). In Parallels 8 I disabled the Use Mac OS X Full Screen option. I've got a 27" 2009 iMac with an external 1600x1200 monitor on the left.

 

I was in exactly the same situation as you. What worked for me was to shutdown the virtual machine and re-enable the 'Use Mac OS X Full Screen' option.

 

Ah, that solves that problem!