Here is more I've found related to the issue:
1) Even though there is a black screen, the VM is running. It's only File Explorer crashed.
2) Task Manager can be launched via ctrl-alt-del, and via it File Explorer can be relaunched. The desktop will reappears but task bar is not responding.
3) Other applications can be launched via desktop icons or Task Manager.
4) Rolling back to pervious 24H2 snapshots doesn't resolve the problem. But, rolling back to a snapshot with 23H2 resolves the problem.
I'm on latest version of MacOS and Parallels desktop. It seems to be an issue between the latest MacOS 15.3.2 upgrade, Parallels hypervisor and Windows 24H2.