I've finally gotten Mac OS X Lion installed as a guest OS (long story, another post). Now I'd like to change the virtual machine's display size. I have a 30" Cinema display, and my VM is trapped in a tiny 1024x768 box. For what I need to work on, this is essentially unusable. I tried resizing the VM window and switching to full screen mode, but that just stretches everything. I tried giving the VM more video RAM, but that didn't seem to make any difference. I looked through the application preferences as well as all of the VM's preferences and nothing seems to relate to screen size. The only display size listed in the (VM's) system preferences is 1024x768. I searched the help and the forums and couldn't find anything, so maybe I'm using the wrong term or it's so obvious I'm just not seeing it.
Have you installed the Parallels Tools? I just have a 13" screen, but the screen is being resized when I change the size of the window.