Running OS X beta4, compactor goes through first pass, XP restarts, then on second pass, stops doing anything while defragmenting virtual HD. Windows task manager shows 20% CPU usage, Activity monitor shows 20% usage. Have left it running for 10 minutes, no progress. Cancelling leaves my VM as was. btw, if I haven't said it enough, Parallels for OS X has been a very welcome peice of software. The one windows only app runs almost flawlessly and I've become confident enough using it to earse Boot Camp and reclaim precious Gbs. Running MPB, 1.8 Ghz, 1.5 Gb RAM. Thanks!
oops... left it on overnight and woke to find that it had indeed worked-- 3.5Gb HD converted to 1.26 Gb image. sorry for hasty post!