Thank you Looran and Steve.
I have made some progress after setting the Network adapter to Bridged on the Parallels menu. Then I entered the IP address manually as 192.168.0.99 (in Win XP network settings). Now from my Win 7 machine I can use Remote Desktop Connection to access the Win XP machine within the Parallels VM.
However when I access Win XP from my Win 7 machine I have no access to the Internet. After much head scratching I stopped the Parallels VM machine and rebooted the Mac. Then I restarted the VM and Win XP. Now I am able to connect remotely to Win XP and use the Internet. So all is well. Strangely, when I checked the IP address of the XP adapter the system said it was 192.168.0.99 and that it was assigned by DHCP! This is weird because that was the address I had assigned manually. Somehow DHCP has decided to assign the same address which explains why it is all working.
My worry is that because I can't explain how DHCP has assigned this address it may suddenly stop working one day. Will cross that bridge later.
In the meanwhile thanks again
Chickoo
Last edited: Mar 19, 2014