1.7.6 is a supported version of X server. Maybe you need Parallels 5.0.9370. Check your Parallels Tools disk. Mount the iso that is located at /Library/Parallels/prl-tools-lin.iso. Then copy the files prltools.tar.gz and prltools.x64.tar.gz that are located at /Volumes/Parallels Tools/tools/ to a folder on your desktop then uncompress them. They should both contain the same set of folders and aliases. My version of Parallels Tools includes the following:
xorg.1.7 is an alias to xorg.7.5.
Code:
bin
lib
sbin
xorg.1.2
xorg.1.3
xorg.1.4
xorg.1.4.99
xorg.1.5
xorg.1.6
xorg.1.7
xorg.6.7
xorg.6.8
xorg.6.8.99
xorg.6.9
xorg.7.0
xorg.7.1
xorg.7.1.99
xorg.7.2
xorg.7.3
xorg.7.4
xorg.7.5