I installed Parallels desktop 4 again. Same problem.
I got it working by disabling the parallels USB manager in the device manager
In Parallels disable the USB Controller in the Virtual Machine Configuration.
then
Open the device manager.
show hidden devices
expand 'non-plug and play drivers'
Double Click 'Parallels USB Device Manager'
on the 'Driver' Tab, go to the startup section, then select 'Disabled' from the drop down menu. Reboot
you wont be able to use any USB devices on the virtual Machine, but they should work okay on the real PC