If you are using host only networking, you are using the Parallels adapter, and the built in Parallels DHCP server.
You don't have to turn off the OSX firewall to make it work, you only need to turn on the required services. I'm not using it, but I suspect that if you turn on Windows Sharing, you can use the firewall.
In my not so humble opinion, having a computer, especially a Windows computer on the Internet without a firewall is an ill advised security risk. The OSX firewall, if you are using Internet sharing, will provide some protection for your VM. The sharing itself provides some protection, but it wouldn't be enough for me. I use both a hardware firewall, and the OSX firewall myself.
If you can't run a firewall between Windows and the Internet, download the free version of Zone Alarm into your Windows VM and run it. It's a pretty good firewall as local firewalls go. It isn't as good as a hardware firewall at keeping the hackers out, but it can prevent much spyware from "phoning home" which a hardware firewall has a hard time doing.
Not protecting yourself because you are only on the net a little is a bit like closing your eyes while crossing a street because you don't do it very often and there isn't much traffic. If there really is a car coming, and it hits you, it's 100% for you even though it's unlikely on a road without much traffic.
My anti virus and firewall have saved my bacon many times. If you don't run them, at least be sure to keep a couple of backups of your .hdd files around for when (not if) you get zapped.
Last edited: Jul 23, 2006