For starters, I'm using Parallels build 4.0.3810 released Dec. 30 2008, and Windows XP Professional with SP3. My computer is a Macbook Pro with 2.4GHz Core 2 Duo running Mac OS 10.5.6. After a clean install of Windows and Parallels Tools on a new VM, there was no sound whatsoever. In Control Panel > Sounds and Audio Devices, there was not even an audio device listed. I then surfed the web extensively and found that some people were enjoying success using the RealTek AC'97 Codecs driver, and that this is even the driver included in Apple's Boot Camp. However, after installing the driver on my VM, sound became enabled but was extremely distorted and choppy, like the sound of a helicopter propeller. After more research, I then updated to the VIA Vinyl AC'97 Codec Combo driver (found here) and sound miraculously worked perfectly! Unfortunately, upon restarting the VM, Windows encountered a fatal error and shut down. After booting in Safe Mode and disabling the driver, Windows booted just fine again, so this driver is obviously causing problems upon startup. Also, re-enabling the driver or uninstalling it when Windows is running causes the OS to crash. If anyone can offer advice on a) what drivers will work to enable sound, b) how to keep the working VIA driver without it causing problems at start-up, or even c) why 90% of Parallels users enjoy sound and I in particular do not, I would be eternally grateful!
Nevermind! I solved my own problem. If you're curious about what I did, read this thread: http://forum.parallels.com/showthread.php?t=32945