mactraveler wrote: "when i do turn off my external drive, parallels does work. but when i power it back on, its not recognized in windows. i didnt have to do this in the previous versions of parallels, why do i have to do it for this. what do i do now?"
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Safely EJECT your USB drives from OS X before booting up your VM. Unplug the USB cable to your drive. Start your VM, and plug the cable in while Windows boots. Down in the lower right of the Parallels window, click on the USB icon, and select your hard drive in order for Parallels to allow Windows to use "see" it. If you have followed these steps, when XP loads up fully, your hard drive will be there.
I have a USB drive that contains 3 partitions: One FAT32. One NTFS. One HFS. Usually it takes about a minute for the system to report them all, so I can use them. Typically, the FAT32 comes up first, and the NTFS partition pops up after waiting. If one pops up, then I know it is working and I need to patiently wait for the others to.