2023 June, Problem persists. Below description of problem and full solution.
1. Shut Down Windows.
2. Close Control Center.
3. Parallels Menu : Update -> Yes
4. After Update, Windows VM will show up.
5. I boot Windows VM.
6. Tools need to be updated dialogue appears. I restart Windows from that dialogue.
7. Dialogue shows up again.
8. I click Restart again.
9. A black screen showing that Tools are being installed is shown, but apparantely only till 15%, and very quick.
10. After reboot, dialouge shows up again (!).
11. Another manual reboot, dialogue still shows up claining Parallels Tools need to be installed
12. I run MSCONFIG
13. I disable all services except MS services (use the option to hide MS) and except Parallels services (PTInstall shows as disabled already)
14. Does not help.
15. I disable all services except MS.
16. Reboot.
17. I disable Firewall by going to system configuration (classic windows sysconfig, not the new settings), then Win Defender Firewall, then Disable both private and public.
18.1 I follow these instructions:
https://web.archive.org/web/20230320231257/https://kb.parallels.com/112609
18.2 For ARM (!!!) I connect via Menu -> Devices -> CD -> PRL-TOOLS-WIN-ARM.ISO (if you do this for the first time, you first need to find the file as described at 18.1 in the link, and connect the image (same menu (devices->CD->connect image -> "In the Open window navigate to Applications > Parallels Desktop > Contents > Resources --> choose the approriate ISO for your version of windows (or other virtualized OS) (!!WIN ARM if you have ARM / Apple Silicon!) )))
18.3 Start Windows File Explorer.
18.4 Navigate to This PC
18.5. Click Paralels Tools Drive
18.6. Double Click PTAgent.exe. If it does not work, start as Administrator (right click)
18.7 Top left the white small box will appear, and IN THAT WHITE BOX (!) (not on a black full screen) you will see installation progress of Parallels Tools. Shortly before it reaches 100%, the Screen might go black with pixel artifacts for a second or two, as if the system crashed. Don't worry, it will go back to normal and then install up to 100% and the white box will turn green.
19. Reboot the system.
20. Double-Click the Firewall tray icon in system tray.
21. Enable Firewall.
22. Run MSCONFIG. NOTE: It is NORMAL if in GENERAL, user-defined is always activated. Don't worry about this, everything's fine.
23. Go to MSCONFIG->Services. Hide MS Services. Enable all services that are shown now. (unless of course there are services of yours that you don't want to start).
24. Reboot Windows.
25. DONE.
Don't ask me why Parallels is not capable of doing this by itself.