If you set up custom window sizes in the VM settings, then you are supposed to be able to select from them within the VM. It's not infinitely adjustable, because the sizes you can select must be supported sizes in the guest OS.
I created a couple of supported resolutions in settings but I can't figure out how to get Parallels to activate them. I thought maybe they would appear in the View menu but I still have the same choices: the small box or full screen.