Thanks guys. How did you initiate the *upgrade* process? I was using Vista Home Premium and could not find any way to initiate an upgrade of my Vista (Home Premium) VM, so I tried creating a new Windows 7 VM (using Windows 7 Business Professional, Upgrade).
The VM was created just fine; however, attempting to get Windows 7 onto it was impossible -- the software would install, but Windows kept reporting that the Product Key was invalid. I returned the Windows 7 Business Professional, Upgrade and purchased Windows 7 Business Professional, Full version which installed and verified without a problem.
Now my challenge is getting the apps and data from the old Vista VM onto the new Windows 7 VM. Can I use Parallels Transporter to do this?