Installing Windows 7 (upgrade); won't recognize the prior Windows XP

MacBook Pro 15-inch, Mid 2010
Running OSX Yosemite (10.10.5)
Using Parallels Desktop 11 for Mac V 11.1.1

Prior version of Parallels was had Windows XP SP3

Last night, I tried installing Windows 7 Home Premium from a 3x Family Pack
Package states: "Upgrade designed for Windows Vista *if you are upgrading from Windows XP, you will need to back up your files and setting, perform a clean install and then re-install your existing files, settings and programs."

I tried several different ways to install or upgrade to Windows 7, but I got error messages.
A "clean install" of Windows 7 seemed to work on the second try, when I did NOT put in the Product Key.

I finally got Windows 7 up and running, and tried to add the Product Key
The following failure: Code 0xC004F061
Description: The Software Licensing Service determined that this specified product key can only be used for upgrading, NOT for CLEAN INSTALLATIONS.

(This despite the package stating that I would have to do a clean install if I was upgrading from Windows XP.)
I have not successfully import the Files and Settings from the Windows XP.

The registration on that Windows XP has an OEM in there. Didn't know if that was a problem for the upgrade.
XXXXX-OEM-XXXXXXX-XXXXX

A 30 minute call with Microsoft yielded nothing. They don't support! (Yeah, no kidding.)
Should I throw in the towel and buy a $50 clean install disk and try again? Or is there anything you can suggest to get the Windows 7 (which is working but not registered) to recognize that the Windows XP (which I've not deleted) is definitely already on this hard disk.

 

Hi HeidiM1,
What happens when you try to upgrade from Windows xp to Windows 7, is there any error message, please provide us a screenshot if you are looking at any error message,
If you want to upgrade to Windows 7 and keep the current virtual machine, please follow the steps suggested at http://kb.parallels.com/115114