So, apparently the AI chat was wrong (imagine that! )
The problem isn't that FreeBSD support was dropped, it's that Parallels accidentally broke the "Other" preset for guest OS type. If you want to be able to install FreeBSD, you should:
1. Select "Other Linux" as the OS type at VM creation time
2. In the config.pvs for the VM, go to the <Video...> section of the file and change <Type>1</Type> to <Type>0</Type>
If you want to edit an existing FreeBSD VM that was created as "Other" type and have it work in the current Parallels version, in the config.pvs file for the VM:
1. Change <OsType>255</OsType> to <OsType>9</OsType>
2. Change <OsNumber>65535</OsNumber> to <OsNumber>2559</OsNumber>
3. Go to the <Video...> section of the file ensure that it has <Type>0</Type> to ensure that the video works in the VM