Ok, well, unplugging my external firewire hard disk works, Parallels will boot up after doing so. Unfortunately Windows won't recognize my external HDD. It holds a FAT32 and Mac OS X Journaled partition. Anyone? Thanks!
Mine outputs the error sometimes, but without quitting, so I just go in anyway. I don't know what your issue would be then... Sorry.
I have read in Mac's help system (I don't remember where it was), that their work around for certain Boot Camp issues was to physically remove the offending drive. As I recall, it was a Boot Camp install problem, not this issue. But... At any rate, I also read somewhere here today that reformatting the drives (except for the XP volume) to Mac formats cured the problems the user was having. Hopefully either Mac or Parallels will deal with this, but in the meantime it seems reformatting is easy. That's what I did, when I had complications with Installing XP in Boot Camp (no Parallels, that's why I ws on Mac's help sites), combined with a RAID set, and a small FAT32 volume for swapping. But I eventually went with Parallels alone anyway, and never looked back. I got to keep all my features including my RAID, and Parallels handles file swapping. Hope this helps someone.