Strange Windows Mouse Behavior

I just switched from PC to Mac and installed Parallels and Windows XP today. Windows appears in the VM as it should but my mouse doesn't work properly. When I right click on an icon or file it should cause a window to open, but, unfortunately nothing happens. In addition, I should be able to drag an icon to another location, but can't do that either.
Have I missed something that I should have done?
Would appreciate some assistance as I'd love to get the new machine operational soon.
Thanks.

 

you installed the parallels tools right ?

 

I believe I did. In fact, I downloaded the latest build and installed that.

 

Did you run the "Install Parallels Tools" menu command while Windows is running?

 

Yes I did.