I was surprised to learn that the Parallels macOS Monterey M1 Apple VM only supports 1440x900. I spoke with a Parallels person who confirmed that you cannot scale the VM resolution to meet the host machine's resolution (unless, of course, you are using 1440x900). I also confirmed that if you see a fuzzy display, that is part of the same problem (which I assume is because the current driver does not support retina/non-hidpi). The support person informed me it has to do with (a) Parallels Tools not installing with macOS Monterey on M1 and (b) there being problems with Apple "locking down their code," whatever that means. Notice that if you attempt to install Parallels Tools, it looks like it installs, but they are not present when you restart.
I am super frustrated with this. After all, I spend my money on Parallels because I use virtual machines to create training, so I am posting this to let you know Parallels is aware and offers no workarounds while they work on the problem.
Someone else already posted this link:
And this is what it says (tucked away down at the bottom of the page):
"Apart from that it is currently not possible to adjust guest macOS screen resolution in real-time mode when resizing ratio"
I asked what "real-time mode" is, and the support person told me, "any time you are running the VM." Then I asked if you could change the resolution before launching the VM and was told, "no, because you cannot access any settings for a macOS Monterey M1 VM".
The support person also informed me they have been having many problems with the Windows 11 release (17.1), which resulted in another release (17.1.1), and are still having problems. I got the impression that Windows 11 support is taking a front seat to macOS Monterey M1 support, although that was inferred and not stated.