I took a longer approach to Vista SP1 installation and all going well so far: 1. Uninstalled Parallels Tools, rebooted and shutdown again. 2. Removed Parallels installed files from Boot Camp partition (see Parallels Help file for method). 3. Started Vista natively in Boot Camp. 4. Used Windows Automatic Update to detect SP1 and install it. 5. Restarted in OSX 10.5.2. 6. Started Vista VM and started Vista. 7. Vista installed Parallels Tools automatically. 8. Restarted Vista VM. Was not asked to reactivate Vista at any time during the above process. Note: Prior to doing steps 1 and 2 above, with Vista running natively under Boot Camp, Windows (Auto) Update could not find SP1. After doing steps 1 and 2 had no problem finding SP1 with Windows Update.