I hope I can save other people the hours of time I spent on this problem. I have been running Windows 7 using Parallels 8, and today I upgraded to Windows 8 Pro, following the directions in http://kb.parallels.com/en/114985. However, Parallels Tools did not work correctly with Windows 8 (it would not reset the resolution of my virtual machine's window correctly). When I attempted to install Parallels Tools again, the installation failed with the dreaded error 1935, as described in http://kb.parallels.com/111730. After hours of fruitless reading and experimentation, the final solution for me was to use the Windows 8 Control Panel to uninstall Parallels Tools, which had been carried over from Windows 7, reboot Windows, and install Parallels Tools again. Problem solved!
Didn't work for me I tried that.... but Windows just crashes when it tries to reboot after uninstalling Tools. Then it reboots again and repairs itself by going back to a windows snapshot before the uninstall..... so I really can't uninstall tools at all. Really frustrating.
