In several threads the consensus seems to be that it will work in 1970 and beta1 (3036), but definitely not in beta 2 (3096) or beta 3 (3106). Consequently I backed off from 3106 to 3036 yesterday and am now able to consistently sync fine with my 700p via usb cable.
Every once in a while I need to stop / restart the hotsync process in xp.
To recap my config is:
pd beta 1 (build 3036)
treo 700p /w usb cable
mbpro c2
usb set to autoconnect
one time issued this command: sudo kextunload -b com.parallels.kext.ConnectUSB
See this for more info, among several other threads.