I've been running Windows XP home ed. on my VM for about a month, turns out it was already loaded on my previous PC (which crashed, which is why I bought a Mac, which is why I needed Parallels...) and today would not let me into my windows desktop without "activating" Windows -- when I went to activate it, says it's already activated...etc, etc. it will not let me on to the desktop. I called Parallels, they told me it was a Windows activation problem. I went out and bought the full version of Windows XP home ed., called MS, they told me they had no support for Parallels, and I should find out how to back up a corrupt VM and create a new VM in which to install my new valid version of XP and then put the old data into the new version...Please help me if you can...
Create a brand new VM without doing anything to your old one, and install (and activate and update) XP. BACK UP THIS VM AND SAVE IT Then install any software you need on the new VM. Update if necessary and test this software. BACK UP AGAIN AND SAVE THE VM. Now add your old .hdd file as a second disk to your new VM, and copy your data files to the new VM. Then you can remove the old .hdd and delete the old VM. You will now have a copy of XP, installed and activated, as a base in case of future problems (almost guaranteed if you use it long enough), and a copy with XP and your software for the same reason. Burn those backups to DVDs if you can, and hang on to them. You'll be glad you did some day.