Help Requested on how to upgrade Win XP Pro to Win 7 in Virtual Desktop?

I have Win XP Pro successfully installed on the virtual desktop (using a MacBook Pro with Snow Leopard and latest updates). A few months ago I purchased an upgrade to Win 7...which I installed. When trying to update windows 7 I get the following message:

"The following failure occurred while trying to use the product key
Description
The Software Licencing Services determined that the specified product key can only be used for upgrading and not for clean installations."

I obviously installed it as a standalone and not as an update...unintentionally of course but I cannot figure out how to install it as an update! Could some kind soul please point me in the right direction to remedy this. I have looked on the Parallels website for any solution but have not been able to find anything. I have not tried to install it under Bootcamp as I prefer just chopping and changing from the one to the other without having to restart the computer every time. TIA