Hi there,
I had the exact same problem, it turned out there was an open dialog warning me that Windows XP needs to be re-activated in the next 3 days because of hardware changes.
It was simple enough to follow Peter's advice, switch to manual mode, dismiss the dialog and then Parallels took over and everything was fine...
Super happy.
Thanks!
Ant
PS: I had to drop into Manual Mode whenever this pesky dialog came up, so Installation took a bit longer than expected