Upgraded to Leopard - no problem - Parallels still running fine after upgrade (except I get the timeout issue mentioned in a previous thread). Upgraded Windows with latest Bootcamp drivers - no problems. The main problem starts happening when I plug the secondary display into my Macbook Pro. Parallels would not start Windows claiming insufficient memory. Then I adjusted the video memory allocated to VM from 16Mb to 20Mb. Parallels was then willing to start the VM, but then I received the grey screen of death and had to hit the power button to restart. I repeated the same process two more times and every time it was the same. To use my secondary display, I have to plug it in AFTER Parallels has started Windows, then it becomes fine. Hopefully this can be fixed in the next update.
This is not a Leopard issue. It's a Coherence issue with build 5xxx. Parallels is aware and is working on an update.