Parallels Desktop cannot allocate enough memory for running the virtual machine.

I have been having latency connection to host files/folders. I followed the suggestion in another post to uninstall macfuse and install a specific 4.0 build. Now I get this when launching my hosts....

Parallels Desktop cannot allocate enough memory for running the virtual machine. Suspend or stop one or more of the virtual machines currently running on your Mac and try again. If the problem persists, contact the Parallels support team for assistance.
 
What specific build you have installed? What is the amount of memory allocated in Parallels Desktop preferences -- click Parallels Desktop at the top menubar -> Preferences? What option is selected -- automatical or manual? What is the amount of memory assigned to the virtual machine? Try lowering the virtual machine's memory amount and make sure that there is enough memory left for Mac OSX.
 
Thanks for the comments.

Build 4.0.3522 Nov 9/08 as came on disc. Last time I tried to install the latest update I could not get my existing VM to load. I would get an error stating that Virtual Memory was not enough, which cannot be correct.

The unit that I am trying to get the latest build on is my MacBook 2.0 duo with 4GB RAM and have tried every combo of virtual memory assigned on the VM from approx. 256mb to 2gb and played around with the video memory too.

I want to do an upgrade as I have the very common and painful problem of resources on the host taking up to 30 sec to connect to when trying to open a file, folder, ect.
 
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