I know that D3D is not totally supported as of yet; however, other users may find this useful. I am running Parallels 3.0 + Boot Camp 1.3 on Windows XP Home with a MacBook Pro. Turning on D3D on my VM then restarting in Boot Camp causes my display to show up in funny (rainbow + pixelated) colors. Then I need to re-install my Boot Camp drivers whenever I turn on D3D. I suppose not a big deal, but definitely a pain and has caused my OS X a couple times to show up in funny colors. Also, on startup the screen will stay dark for a prolonged time (displays after the Apple logo disappears) and if you use Boot Camp as a bootloader, you'll have to restart Windows blind (not very hard, just hold alt, wait, select right, hit enter) after you re-install drivers. A bit disconcerting to have VM affect the Boot Camp in such a significant & detrimental way like that. No harm no foul. -Me As an aside: it may be rough for the Parallels team to receive such harsh criticism especially after a lot of work to improve the product; however, the ability to play 3D Windows games on a Mac is the Holy Grail to a lot of users & promising it w/out HUGE qualifiers laid out up front and loudly is a bit of a whoopsies. A lot of these users are past the initial 'wow' of Windows running smoothly alongside OS X and expected to be 'wowed' again.
My earlier conclusion may have been a little premature. I am still getting crazy colors & am in OS X at the moment. Not sure how to fix it. Am a bit disappointed though as I was hoping to use Parallels to help at work & now I am unable to work on my machine at all. I suppose I'll re-install drivers from earlier Boot Camp, though I wonder if it will then make me go through the hassle of the Microsoft re-activation dance. -Me
Didn't re-install drivers, instead I rebooted PRAM (hold Cmd Opt P R on reboot) and it cleared my issues... for the time being.
This issue does NOT appear to be Parallels related. I have used Parallels 3.0 with my Windows XP Boot Camp partition for a while without these issues. Recently I decided to reinstall and in the process updated Boot Camp to 1.3. Now today I have twice experienced the color issue you're describing and I haven't even run the Boot Camp partition in Parallels yet or installed Parallels Tools on it.