Just moved my parallels system from a MacBook Pro to an iMac, everything but sound seems to be working just fine. I get the following messages when I boot or try to activate sound.. Unable to connect Sound 1. A file or device required for the operation of Sound 1 does not exist or is used by another process, or you have no permission to access it. The virtual machine will continue running, but the device will be disconnected. and then it's muted. Searched but didn't find anything helpful.
Try reinstalling the parallels tools? Have you connected the sound device in your VM's settings (Hardware)?
Well, it started working today. I'm not 100% why, but I think it might have been a conflict with EyeTV. EyeTV was set to use digital output not system output, and I think it had the device exclusive because of this. I've run into issues similar to this with EyeTV and DVD player trying to do digital output in them. I didn't remember setting EyeTV to digital, but I must have a some point in the past.