I'm running Parallels 3.0 build 5540 on my MacBook Pro (Core 2 Duo, 2.33 GHz, 2GB RAM), recently upgraded to Leopard. Been running fine without incident until now. I have, however, been having kernel panics upon waking the MacBook Pro from sleep under Leopard, so I undertook a bit of troubleshooting. My first step was to find third-party kernel extensions, and I was shocked to see that in /Library/Extensions were: VirtualPCNetworking1028.kext VirtualPCNetworking1040.kext Both were PowerPC-based and dated June 7, 2005, long before I owned my MacBook Pro. Thinking that these were vestiges of an earlier Virtual PC install that had somehow mistakenly been moved to this machine by Apple's Migration Assistant when I first brought it home, I moved them to the desktop and rebooted. Imagine my surprise when Parallels would then no longer connect to the Internet! Every attempt to go online from within my guest OS (Windows XP Pro SP2) would end in a "Your computer is not connected to the Internet" message. Needless to say, I hadn't made any changes to Parallels configuration. I put back the two Virtual PC kernel extensions, rebooted, and Parallels was fine! Why on earth would two PowerPC-based kernel extensions be necessary for Parallels to connect to the Internet on an Intel-based MacBook Pro?
Turns out there was all kinds of bizarre stuff going on. Completely uninstalling, trashing all my Parallels prefs, and reinstalling did the trick -- at least for now. Here's the thread in the beta folder, where it belonged from the start: http://forum.parallels.com/showthread.php?t=17792