A Working Resolution!
The latest suggestion I received from support works!. This worked for me given one caveat.
NOTE: For this to work I had to perform the steps using the "primary" LCD (this is the display the Apple Logo is on during boot).
1. Unplug all the monitors except primary monitor
2. Parallels Menu bar -> Virtual Machine -> Reinstall Parallels tools.
3. Restart VM.
3. Go to the coherence mode.
4. Plug in your other LCDs
This is on a late 2010 Mac Pro with ATI HD 5770 and 3 external LCDs (2 via mini DP w/ dual-link adapters and one DVI). I believe it was the mini-DP towards the edge of the case that was my primary connection.
Last edited: Sep 18, 2011