While I appreciate the response, you are making several assumptions that are simply not valid.
First of all, yes, I am aware of the Command+# keyboard command to switch between desktops. In fact, I use this all of the time. However, when I am in full screen mode in one of my VMs, this keyboard sequence is indeed processed by Windows, and will not be recognized by OSX until I make the Mac menu and dock visible. And before you jump in and say this is not correct, you also need to know that I turn OFF the "Use Use Mac OS X Full Screen" option for my VMs. Not only does this affect the operation of the Command+# keyboard sequence, it also means that when I move the mouse pointer to the top of my screen, the Mac OS X top menu DOES NOT appear.
And yes, I am very aware of the various keyboard shortcuts in Mac OSX itself, Parallels, and with the VMs. I use many of them and have even had to customize a few because of interference between several Windows apps I run.
However, you are missing the point of all this. I've been running with this arrangement of full screen VMs (and some windowed versions as well) since Parallels Desktop 5. And yes, I am aware of the various ways to switch desktops. As I explained in my original message, I often use my trackpad to do a 3-finger swipe to switch desktops, but I don't always have my trackpad, which is the case right now. I am working at a remote location and have my Mac Book Pro connected to an external monitor. The lid to the Mac Book is closed so I don't have access to the track pad.
The point is that something changed in the keyboard driver for PD 10. The good news is that I last night (early this morning) I had a long chat session with a Parallels Support Staff member and we tried many different things to try to resolve the issue. One of the steps was to bring up the On Screen Keyboard that is part of Windows. What was most interesting is that when we restarted Windows and displayed the OnScreen Keyboard, the NumLock key state was indeed OFF. However, if you press any of the numeric keypad keys (e.g. Left Arrow/4), the NumLock state would automatically change to ON. Then trying to turn it back off using the OnScreen Keyboard would not work because the On-Screen Keyboard would lock up until you physically pressed the NumLock key on the keyboard. It was very strange behavior, but more importantly, it was repeatable.
In the end, the support rep escalated the issue, so hopefully Parallels will be able to resolve this in an update.
Ray