I resolved this issue on my machine. After submitting a ticket, I was referred to thread
http://forum.parallels.com/showthread.php?t=32137
I have posted my solution below, as well as to the above thread:
After this happened to me for the first time after many upgrades over the last two years without issue, I submitted a ticket and was sent to this thread. After reading all the way down, I decided to try MisterAl's solution (the post immediately preceding this one). It worked like a charm. No Microsoft cleanup utility was required for me.
One thought I have, based on what changed on my computer since the last Parallels upgrade just a couple of months ago, is that it was one of three things which caused the hangup.
1. Running in bridged vs. shared networking. I used to run in shared. I now run in bridged.
2. Installing Citrix GoTo meeting which runs in the background
3. Installing DropBox, which runs in the background.
Anyway, the following steps fixed the problem.
1. Turn of Airport (never used to be a problem, but easy to disable)
2. Remove my USB Keyboard and mouse (they never used to be a problem, but it was easy to just unplug them)
3. Remove my external monitor
4. Turned on my Windows XP VM.
5. Turned of programs running in task tray that were new since last upgrade (GoTo Meeting, DropBox).
6. Turned off Windows Defender...not because I thought it was a problem, but because it's Monday morning and it was doing it's scan, which just slows the system down.
Since my Parallels Tools had last been aborted, it won't start automatically, s I went to the Parallels menu option of Virtual Machine, Install Parallels Tools.
It started up and ran straight through, finishing in about 2 minutes, maybe.
MBP late 2008
8GB Ram
Windows XP VM
Parallels Build 6.0.12092
(Revision 670880; June 26, 2011)