Not a pretty upgrade ....

24" iMac 4g ram, Win XP SP3

FYI, my experience with 4.0 upgrade

Upgraded 3.0 to 4.0
Backed up XP VM to external drive

In converting to new vm format progress bar hang up at ~ 50%
After a long time (15-20 min) got error message saying upgrade could not be completed.

Behind this dialog box was a windows box saying I had to activate XP which I did.

A basic windows desktop opened and at the bottom of the screen says
Parallels Tools not installed and to click install from Parallels Menu which I did.

After ~ 10-15 minutes progress bar made it to %100 and just sat there.
Went to quit Parallels and it said can not still installing Parallel Tools
Waited another 10-15 min and decided to force quit.

Restarted XP VM and every thing seems to be working fine
Sound, Mouse, Network, Printers etc

jrt