Same error, different conditions
I experience a different situation. Same error, however, my .XML is fine. (I have tried a backup, tried a new VM and copy, etc.) The XML IS ok. They are identical (used a file compare program). 
However, My VM Keeps telling me the very same error. Yesterday I posted that a possible solution was to delete the paralells folder from user/library but that doesn't work anymore. 
Now, if I fast user switch to the original user of the box (when I Installed OSX) ... IT WORKS. The VM is on an external drive and both users are admins, both users have ReadWrite permisions (heck, even Others have ReadWrite). I used the migration tool to get my user back (and hence paralells 2.5). But I had to reinstall Parallels (to get the kernel extension back I suppose). Then I upgraded to 3.0 and this problem arose. 
I don't know what permission is Paralells missing, or what is wrong. I am a little bit disappointed with this but above all, I need to find a fix, I work in Paralells. 
ANy ideas?
For the folks asking for a "correct" XML here's mine:
	Code:
	
<Parallels_disk_image Version="1.0" >
    <Disk_Parameters>
        <Disk_size>65536128</Disk_size>
        <Cylinders>65016</Cylinders>
        <Heads>16</Heads>
        <Sectors>63</Sectors>
        <Tools>
            <Installed>No</Installed>
        </Tools>
    </Disk_Parameters>
    <StorageData>
        <Storage>
            <Start>0</Start>
            <End>65536128</End>
            <Blocksize>63</Blocksize>
            <Image>
                <GUID>{5fbaabe3-6958-40ff-92a7-860e329aab41}</GUID>
                <Type>Compressed</Type>
                <Flags/>
                <File>winxp.hdd.0.{5fbaabe3-6958-40ff-92a7-860e329aab41}.hds</File>
            </Image>
        </Storage>
    </StorageData>
    <Snapshots>
        <Shot>
            <GUID>{5fbaabe3-6958-40ff-92a7-860e329aab41}</GUID>
            <ParentGUID>{00000000-0000-0000-0000-000000000000}</ParentGUID>
        </Shot>
    </Snapshots>
</Parallels_disk_image>
 Ideas? I've repaired permissions, checked everything. I don't want to reinstal paralells, because I don't know if my Key is going to work!