I can't remember if Parallels used an image file for CD/DVD-ROM drive when I first installed it. When I check the settings, it is using the actual CD/DVD-ROM drive. The problem with this is that I can't use the drive on both OSX or XP at the same time. It's either or. I tried locating the img file for the CD/DVD-ROM (if there was one from the start) but can't seem to find it. Any advantages from using an img file for the CD/DVD-ROM drive? Thanks in advance.
You can manually create an image file from any CD or DVD disk using Mac OS Disk Utility or download some software (like free open-source Linux distributions) from the web as image files. The main advantages of the image files over regular disks are greatly higher reading speed and reliability, it can't be made unusable by scratched surface, for example. So using an image file is not intended to replace using regular CD/DVD drive, but you can easily solve the problem you are describing by disabling the "Connect at startup" option in VM CD/DVD settings to stop it from taking CD/DVD drive from Mac OS.
