Partial Success
I managed to reinstall Parallels Tools by running the installer inside the /Library/Parallels/Tools/prl-tools-win.iso disk image. Parallels Tools installation went through just fine this time. Also managed to uninstall Parallels Tools completely through add/remove programs successfully afterwards, just to make sure.
I next reinstalled Parallels Tools through the Virtual Machine menu item and this went fine as well.
I notice that all Parallels Tools services are working fine now.
However, I am still noticing sluggishness, especially when the windows installation is freshly-restarted. It takes forever for applications to launch and if I try to open up process manager, windows explorer or windows taskbar seem to stall. So I guess I won't manage to fix this while mess without creating a new virtual machine and installing windows from scratch.
Last edited: Nov 15, 2010