So if you are like the vast majority of us stuck in a loop during the VM upgrade process from v3 to v4 here is a possible solution. I cannot guarentee that everything has been upgrade but so far my v4 VM has been working OK.
After trying "Backup & Convert" for the first time and the upgrade does not complete the v4 upgrade try the following.
1) In Parallels 4 goto the menu File>Run Parallels Transporter...
2) Parallels Transporter will open click Continue
3) Select Express and click Continue
4) Select Virtual Machine and click Continue
5) Select Virtual Disk and click Continue
6) Click Choose and navigate to your old Virtual Machine (VM) hard drive image. Please note that the new structure of version 4 may make the old VM hard to find but you are looking for a large file normally around 30GB called something similar to winxp.hdd. You may even have to navigate inside this file to another file with the exact same name. Just keep navigating down until you can't go any further. Once you have selected your old .hdd file click Continue
7) Parallels transporter will now migrate the .hdd image to a new VM
8) When finished make sure to check "Start the new VM" (or something similar I forgot to right it down but there is a check box you need to check before you click Finish)
9) The upgrade process will start again. If you get the "Manual Upgrade" message click yes and proceed with the manual upgrade. If Windows pops up a message about reactivating click "No" - if the mouse doesn't work use the arrow keys. After Step 2 of the upgrade you may even get another error message saying the VM cannot be upgraded - don't let up - keep going. You will probably get the "Windows Reactivation" message again - click "No" (this time the mouse will probably work) - cancel all the "New Hardware Detected" windows and anything else that pops up - be very patient and it should automatically start up with Step 3 - just wait and be patient. Step 3 should upgrade the "Virtual Hardware" and takes a loooong time. You'll probably have to go through all the errors again as stated above before Step 4 will automatically start.
10) Your nearly there - it's so great that Parallels has instructions and support documents for this
Step 4 installs the latest version of Parallels Tools. Probably the quickest of the steps. You should then be presented with "Your virtual machine has been successfully upgraded" - I beg to differ on the description
but you should have a working VM.
11) One more thing - you'll probably have to reactivate Windows
which will probably mean you will have to phone Microsoft 1-888-571-2048 for them to activate it over their automated telephone system. Remember you are activating on only ONE machine, it has only ever been installed on ONE machine and you have had a significant hardware upgrade when asked these questions during the upgrade process.
12) Everything should now be up and running - I've tried a few applications and no trouble so far.
So I hope this helps with those stuck in the upgrade loop - wow what an easy upgrade that was!!! NOT.
After trying "Backup & Convert" for the first time and the upgrade does not complete the v4 upgrade try the following.
1) In Parallels 4 goto the menu File>Run Parallels Transporter...
2) Parallels Transporter will open click Continue
3) Select Express and click Continue
4) Select Virtual Machine and click Continue
5) Select Virtual Disk and click Continue
6) Click Choose and navigate to your old Virtual Machine (VM) hard drive image. Please note that the new structure of version 4 may make the old VM hard to find but you are looking for a large file normally around 30GB called something similar to winxp.hdd. You may even have to navigate inside this file to another file with the exact same name. Just keep navigating down until you can't go any further. Once you have selected your old .hdd file click Continue
7) Parallels transporter will now migrate the .hdd image to a new VM
8) When finished make sure to check "Start the new VM" (or something similar I forgot to right it down but there is a check box you need to check before you click Finish)
9) The upgrade process will start again. If you get the "Manual Upgrade" message click yes and proceed with the manual upgrade. If Windows pops up a message about reactivating click "No" - if the mouse doesn't work use the arrow keys. After Step 2 of the upgrade you may even get another error message saying the VM cannot be upgraded - don't let up - keep going. You will probably get the "Windows Reactivation" message again - click "No" (this time the mouse will probably work) - cancel all the "New Hardware Detected" windows and anything else that pops up - be very patient and it should automatically start up with Step 3 - just wait and be patient. Step 3 should upgrade the "Virtual Hardware" and takes a loooong time. You'll probably have to go through all the errors again as stated above before Step 4 will automatically start.
10) Your nearly there - it's so great that Parallels has instructions and support documents for this
11) One more thing - you'll probably have to reactivate Windows
12) Everything should now be up and running - I've tried a few applications and no trouble so far.
So I hope this helps with those stuck in the upgrade loop - wow what an easy upgrade that was!!! NOT.