Hi DanD1,
Please take a backup of the virtual machine before following the steps below. Copy '.pvm' file to any folder or create a new folder "Back up" and copy it or to an external drive (Location of .pvm file: Documents > Parallels > Windows.pvm file or Users > Shared > Parallels > Windows.pvm file).
Follow the steps suggested below:
1. In Mac OS X, go to Applications > Utilities and launch Terminal
2. Paste the command below into Terminal as is (do not hit Enter yet):
prl_disk_tool merge --hdd
3. Find your virtual machine in Finder. Right click on the .pvm file of your virtual machine and choose Show Package Contents
4. Drag your WindowsXXX.hdd file into Terminal and drop it. In Terminal you will see something like this:
prl_disk_tool merge --hdd /Users/Username/Documents/Parallels/Windows\ 7.pvm/Windows\ 7-0.hdd
Note: there should be a space between --hdd and /Users/Username...
5. Press Enter key to start merging Snapshots. Once this is done try to compress virtual hard disk again. ( VM config
http://kb.parallels.com/117287 > Hardware > Hard disk 1 > Compress)
Also please delete parallels.log files manually.
1. From the Parallels Desktop menu, click on Parallels Desktop menu bar or click on Parallels Desktop icon (on top right menu bar) -> Preferences -> Advanced -> Troubleshooting: "Uncheck" Use Detailed log messages.
2. Go to Documents > Parallels > Windows.pvm file or Users > Shared > Parallels > Windows.pvm file > Right click (Ctrl+click) on Windows.pvm file > Show package contents > check the size of parallels.log file. If the size is in Giga Bytes (GB), delete the parallels.log file and check how it goes.