Two of my VMs are affected by this: macOS Monterey and Ubuntu. Not a big deal, nothing critical in either. After Parallels automatically updated Tools in each OS, I rebooted twice, reinstalled Tools, both still have the display problem.
Sorry I didn't have time yesterday to do that. JIC I reinstalled Tools in Ubuntu again and still can't resize the display. I submitted a technical report. Thanks!
Sadly I didn't note it because my Internet decided to go down right then and Firefox was in the background. Is there a way I can look it up? I don't see it from my subscription account.
Bottom line: I created three new Linux VMs, all three resized the display OK. I created a new Ubuntu VM, everything worked fine. So clearly if was either 1) Parallels Tools not properly updating or working with the old Ubuntu, or 2) my Ubuntu was fried. Either way it's an edge case not worth pursuing. I also created VMs with elementary OS and Raspberry Pi OS Desktop (Debian). In Raspberry the tools wouldn't install, the procedure in this thread worked: https://forum.parallels.com/threads/debian-buster-based-raspbian-raspberry-pi-desktop-for-pc-and-mac-with-poll.348460/