here is a much easier solution that worked for me. 1st, stop your windows 11 install. don't delete it. create a new install and pick download from Microsoft. Getting an arm image from other sources usually fails to install. after the download finishes, and the automatic install starts, an iso image should have appeared in your downloads folder. pause the install by closing the windows in parallels window then copy this image to another location before parallels tries to delete it. then abort the install and the vm should automatically be deleted, you can abort by right clicking the second windows 11 install in your vm list.
Now, boot your regular windows 11 vm again and navigate to the iso you now have. Please note, attempting to mount an iso from a folder that's shared from Mac to windows doesn't work. so copy the iso image to another location in windows, such as the root of drive C. now mount it, run setup per normal, and wait. In my testing this works about 85% of the time. sorry about the remaining 15 but this is windows, it is known for getting screwy and sometimes not wanting to upgrade due to something being broken in your windows install. this iso is custom built for parallels, so has all the modifications and drivers needed to properly boot in parallels on arm processors, I suggest keeping a copy now that you have it in case you ever need it again.