I changed the Hypervisor option from Parallels to Apple and it now works! However, when starting the PVM my captured Win XP PC is not wanting to boot up -- I get the blue screen of death! It never rains but it pours.
I get the front end Windows XP logo and the 'STARTING' bar for a few seconds, then it quits to the blue screen. (It never used to when I ran the PVM on a slightly older iMac?!?!?)