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Fixed ... I uninstalled Parallels 7 and all the files under it. I then reinstalled Parallels and Windows. All seems to be working as before...
I have now tried the program with windows applications and it does not work. It does not see the Mac file system.
Windows cannot access \\psf\Home\Desktop - P7 I was using Parallels 6 with Win 7 Pro on top of Snow Leopard with no problems. Upgraded to Lion...