Here is how I got 4.0 to work

As others have posted, it worked for me:

1. During the conversion process (4 steps taken by the installer app) Windows will start up and ask you to update drivers and re-activate your copy of windows. Cancel all driver and hardware updates, and cancel the activation process. This should return you to the installer where it jumps from step 1 to 2 to 3 and so on.

2. Ultimately you will not be able to continue the above process and will need to re-activate windows online--no big deal, don't need your reg codes for this (I didn't), and you are returned to the installer for any of the 4 steps not yet completed.

3. After completing the 4 step conversion process of your data and re-activating windows, your windows VM should work along with all the hardware and drivers working as you cancelled their updates earlier.

4. Run the Parallels Tools Installer to complete the setup.

This may not work for all, but it certainly worked for me--took about 30 minutes to complete. Since then 4.0 has been stable and fast. I like it.

Good luck!