Solution for me
I had this problem.  For some reason, the CD had become permanently attached to an .iso file that contains the Tools installation files.  So each time Parallels was started, I would be re-invited to install (or remove) Parallels Tools.
The solution was simple.  Mouse over to the CD icon in the lower right corner of the Parallels application window.  Select "Default CD/DVD-ROM" instead of the VM Tools .iso file.  That restored normal operation for me.
					 
				
			
			
			
		 
		
		
		
			
			
				Last edited: Feb 28, 2007