Videos (MP4 and .mov) break up under Mac OS X 10.6.8 (Snow Leopard Server) with Parallels 16.1.1 using the latest Parallels drivers. If I keep the old drivers, it works. I noticed this first with iMovie HD (6.0.4) which has become unusable. But just playing straight videos with QuickTime Player (10.0) also exhibits the same problem. With the new Parallels drivers, the video starts out playing, then starts breaking up. If I block the driver update, I can play the videos just fine. I'm using a 16-core Mac Pro 2019 with 4 cores, 8GB RAM and 1GB graphics allocated to the VM.
I am happy to report that after I upgraded to Parallels 16.1.2 and set the CPU & Memory -> Advanced Settings -> Hypervisor to "Apple" my problem has gone away.
Sadly, this only helped for a while. I'm still having trouble playing and editing videos under Mac OS X 10.6.8 (Snow Leopard Server) with Parallels 16.1.2 using the latest Parallels drivers.
Good news! It appears that update version 11.3 (or 11.3.1) of macOS (Big Sur) may have fixed this problem.
