I was using parallels 17 from my intel MBP previously that transferred to the new M4 pro MBP and got this message.
What worked for me was to download from my account the image for Parallels 20 - don't download the installer as it wants to download Parallels 18 only, and I had the same issue.
Once Parallels 20 was installed, Win 11 downloaded and was installed properly.