Sorry, actually Parallels 5: Using Parallels 4, Windows XP SP3, I plug in a Panasonic camera and I get the message: "Unable to connect USB device to your virtual machine." "The Device cannot be connected now. Please try again later." Why? The camera connects to Mac OS fine, but refuses to connect to Windows. It is listed in the USB device list and drivers have been installed. Of course trying later produces the same result. Less important, could this meaningless message be replaced with something more helpful.
Please, do the following: - run virtual machine - try to connect your device - generate problem report (go to menu Help -> Problem Report) - post report's id here