Nailed it! I did as suggested to create a new vm and use my existing hdd... problem solved after deleting and reinstalling parallels tools (not a pretty process). I then did some testing on another vm I had and discovered a minor difference between the two vm configurations. The field in the config.pvs for <Hardware><Chipset><Type> was set to 1 instead of 0. By changing that on my other vm to 1 and then reinstalling the parallels tools I'm a happy camper. Here is the detailed steps I used: - shutdown the winxp vm - right click on the vmname.pvm file and select show contents - edit the config.pvs file with a text editor - find the Hardware/Chipset/Type section of the XML and change the value to 1 from 0 - save the file - start the vm and select cancel to all the new hardware setup windows - wait until they stop (usually after the 'some hardware did not install properly' message) - open add/remove software in the vm and uninstall parallel tools (this took foreever for me) - reboot the vm when it completes (it will ask you) - again, cancel all the new hardware setup windows - delete any 'prl*' files in C:\WINDOWS\system32\drivers (including the prl_* files) - in the parallels virtual machine menu select install parallels tools and wait until it completes (may take a while) - if prompted to insert the xp service pack 3 CD, just browse to the C:\WINDOWS\system32\drivers directory and it will find the file it needs (I was actually prompted this way for two different files both times I've done it) - reboot the vm when prompted - enjoy the return to the version 3 speed CAUTION: I'm just telling you what worked for me, your milage may vary... make backups! ANOTHER NOTE: Uninstalling parallels tools and reinstalling took over 30 minutes for me; be patient. Now I'm off to try this on my wife's system so she can smile again too Chuck UPDATE: Worked like a charm on the wife's vm and is even snappier than mine!