I tried this, but I get the following message from Terminal. Any help is appreciated. Note that I don't want any snapshots or backups. I want Windows to be as lean as possible. I am a light Windows user and have an SSD with limited free space.
~ jober$ prl_disk_tool merge --hdd /Users/jober/Parallels/Windows\ 7.pvm/Windows\ 7-0.hdd
objc[4312]: Class DeallocHook is implemented in both /Applications/Parallels Desktop.app/Contents/Frameworks/ParallelsVirtualizationSDK.framework/Versions/5/libprl_sdk.5.dylib (0x106d166b0) and /Applications/Parallels Desktop.app/Contents/MacOS/prl_disk_tool (0x105533880). One of the two will be used. Which one is undefined.