My solution to Stage 2 "unable to upgrade this VM"

Everything went well until after several minutes in stage 2 I got the "unable to upgrade this VM" message (can't remember exact wording).

I shut down the VM from the top control line (may have done ctrl+alt to get mouse back) and closed Parallels.

Restarted the whole computer.

Launched VM again.

XP Booted up with message about Parallels Tools not being installed.

Windows "found new hardware" and hardware wizard messages kept appearing very slowly.

I quit and cancelled all of these. Sometimes took several clicks and several minutes to respond.

Eventually windows gave up and said some things may not work properly.

Then launched Parallels tools from the Parallels menu.

Took ages to respond, much longer than I am used to with ver 3.

Eventually Parallels tools installed, and things appear to be working.

No rocket science, just persistence and patience, and it may not work for everyone.

 

This was my experience when I upgraded with a beta release. On the second attempt, I ignored the Windows dialogs and let Parallels do its thing. Eventually, the Tools installation caught up and launched itself.