Disabling the Windows Application Folder (WAF in the rest of this post) in the dock should fix the 100% CPU of the Dock process.
But whatever new format/method Parallels is using for the icons is also causing the Finder to crash/lock up/beachball/high CPU if you open a Finder window showing the WAF. The Finder can't draw the icons of the files properly. On my system, the location of the WAF has been moved again to ~/Library/Caches/Parallels/Applications Menus/(VM Name) Applications/ (which I appreciate because I didn't like it in the ~/Applications/ folder) and if I open that folder in the Finder, it crashes the Finder.
When they were in the old location and format (small application), I used an icon editor to apply custom icons to the apps as I didn't like the Windows icons (with the Parallels red lines) or they were low resolution. I would add 128, 256, and often 512 pixel icons to the application file. Is this adjustment causing the Finder issue with your new XML format?
EDIT/Followup: It seems I was wrong about the new location. The small applications are still located in my ~/Applications/ folder and the new files in the ~/Library/Caches/Parallels/ folder are just pointer/detail files of the Start menu. Still having Finder crashes when trying to view that folder though.
Last edited: Jun 30, 2011