Cannot get to 1st Base in Version 3.0?

I was a previous user of the version prior to V3.0 without any problems. In fact I updated 3 or 4 times without any issues what-so-ever. I was going to upgrade to Vista, then after ordering V3.0 I decided to hold off installing Vista, and decided to stay with XP Home a while longer. Anyways, V3.0 came in the mail two days ago. After cloning the older version of xp home, I went forward with the installation of V3.0. Everything appeared to going along just fine. After the restart of the iMac and typing in the Activation Key a warning appeared.
"Attention: Virtual machine cannot be resumed because the saved state file detected on disk is incompatible with the current version of Parallels Desktop. You can either restart virtual machine (saved state file will be deleted automatically), or cancel start. Do you want to reset virtual machine? [Yes] [No]
I selected 'No' and backed out of the program until I could find more information on exactly what 'saved state file detected on disk is ... ' meant.
I tried the User Manual, the online Help Files, then the online FAQ's, then the index, still unable to find anything, I wrote to the Parallels Support Team. I still haven't heard from them, but it'll probably take a few days for a response from them. I still don't have aclue what file the warning is speaking about. Has anyone experienced this before, if so, how do I fix it.
Like I said in the beginning, I did not ever have any issues with the previous version. But V3.0 is something else. At least so far.
Any help would be appreciated.

 

My guess is you didn't shutdown the guest OS completely before you made a clone. I would try doing that first and seeing if it fixes the problem.

And if not I (personally) would just say yes and have it reset the VM because the worst that could happen is it becomes corrupt and unusable in which case you still have the backup.

 

you guess? this is only our stuff.

 

Removed things the hard way and started all over. Got through the bases with a re-do of the install. Everything is okay, have upgraded to Version 4 and latest update to that one.