Think I've found a workaround until Parallels fixes what seems to be a conflict with Leopard
I found the same problem after installing Leopard 10.5, running Parallels 3
The 'C WindowsXP' which used to mount automatically under 10.4.10 now reports a Timed Out error
I also tried updating MacFuse but that had no effect. Then I looked into the Parallels Configuration editor and found that setting the "Shared User Profile" to "Enable" and checking "Documents to My Documents" allows you to open the Mac's Documents folder in Windows and transfer files that way. Problem is, its really slow and it takes time for the screen to refresh, folders to open etc.
What then happened was, about two minutes after opening the "mapped" Documents folder in Windows, Shared Folders and an icon for the PC appeared in the Finder with links to all the shared folders in Parallels
So I reset the Shared Profiles in Parallels Configuration editor to map only 'Music As My Music In Windows'
And two minutes after opening that Music folder in Windows, the PC link in Finder appeared again
Now all file transfers to the PC from the Mac happen quickly through the Finder, and file management on the PC is back up to speed