Not everyone is perhaps too inclined with patching files, so I politely try to add some information..
In short, follow these few steps:
- Boot into old (previously working, 3.16) kernel (in my case, that one was also non graphical this time)
- mount Parallels Tools cd and install tools
- Download, correct and apply patch file
- Reboot to new (3.17) kernel
When back on older kernel (3.16.x) which worked before, select 'reinstall tools' from the actions menu in parallels. (you will have a non-graphic vm at this point, as I did. you can SSH into the system or (perhaps) enter the local login as described in attachment of OP.
mount cd (create a dir under /mnt called 'cd' and execute 'mount /dev/cdrom /mnt/cd', run install and the install _should_ succeed (as was in my case).
Then, go to /usr/src/parallels-<latest-version>, assuming you have the latest version of parallels tools installed now.
descend to the subdirectory prl_eth/pvmnet directory (so in my case: /usr/src/parallels-tools-10.1.1.28614/prl_eth/pvmnet)
now make sure you have 'patch' installed for the patch to be applied. (yum install patch)
To use patch, the above provided diff.txt file needs to have the correct format. For me it was not in the right format when I downloaded it. I had to enter vi and execute the next command:
':%s/^M/^M/g' (^M obtained by the sequence Ctrl-V Ctrl-M, both times)
':wq' (to save and exit the file)
Then, from the above mentioned pvmnet directory (remember where you stored the diff.txt file mentioned above), execute 'patch -n -p0 <pvmnet.c.diff.txt'. It will ask which file to patch, enter 'pvmnet.c' and if all is set fine, it'll show it successfully applied the patch.
Now all I did was reboot and boot into the newest kernel. The dkms applies the driver automatically to the new kernel and because of the patch we just applied it will succeed this time.
My two cents to aid in resolving a non-graphical 3.17 kernel VM in Parallels Desktop