I ran into the same problem despite having deleted all Snapshots and disabling Undo Disk. I was able to find a solution that worked for me.
I created a brand new expanding virtual hard disk and had everything from my original disk copied to it using a free program called clone maxx. After that I was able to run compressor successfully. To do this you do need enough disk space available to make a full copy of the original virtual disk though.
I added a new virtual hard disk (expanding) to the Parallels config as a second hard drive. I made the max size of this new virtual drive the same as my original drive.
I downloaded freeware Clone Maxx pci_clonemaxx.iso from this site:
I setup the Parallels config to boot from CD using the clonemaxx iso.
The system boots up using clone maxx and has a very simple interface to clone the entire disk to the new disk.
It takes about an hour, but afterward you should be able to set your newly cloned drive as 'disk 1', and from there I was able to finally run the compressor from the actions menu. Hope this works for others.
Last edited: Sep 25, 2007