Create a new VM
I was pleasantly surprised at the speed of Parallels when I first installed it. I have used other VM products on other OSs and machines that run well, but aren't always zippy.
When I bought my MacBook Pro Core 2 Duo 2.33 2 GB at the Apple Store, I bought Parallels without even trying it based on feedback at
www.macintouch.com. I wasn't disappointed. Parallels running Win XP SP2 off of my Boot Camp partition seems nearly if not just as snappy UI-wise as running in Boot Camp for basic Office usage. Even Office 2003's speech recognition works well enough, even with only 1 virtual CPU.
I tried VMware as well and even the latest beta 2 is slower than parallels on my machine. Granted, they claim that's due to a lot of beta code.
I suggest you create a brand new virtual macine instead of using a converted one and see if that doesn't help. I've had real PCs slow to a crawl when loaded with software and used for a few months compared to a fresh install of Windows. Also, the latest versions of Parallels comes with an Anti-virus software that slows the VM down at startup while it checks for updates and scans the startup files.
Now some notes about memory. Do check your actual free memory on your mac. If you are running Parallels and for any reason active virtualized memory (i.e. Memory allocated to the Virtual Windows machine) is caused to be put into Mac OS X's virtual memory, you will be in for some long waiting. This could happen if you have many apps open in OS X and you then ask it to allocate a huge chunk to Parallels. I'm guessing that OS X does a good job of keeping active porgrams memory (i.e. Parallels) in RAM and not virtual memory, but there's only so much it can do if you're playing songs, downloading web pages, calculating large spreadsheets, and running filters on large images in Photoshop (you are probably not doing this
Oh yes, and if you are really low on hard drive space on your System drive, that could cause problems too.
My 1st guess would be that you might be using a VM loaded with software and their associated startup/background processes.
Good luck!
Ben