Parallels Desktop 4, build 3844, Parallels Tools will not install

When I install Parallels Tools in Vista Business 32-bit, it appears to complete the install, then displays an error and rolls back the entire install. It then recommends I reboot the system and try again. I have done so, with no effect. The error is:
Parallels Tools Installer Information
Error 1935. An error occurred during the installation of assembly component {98CB24AD-52FB-DB5F-A01F-C8B3B9A1E18E}.
HRESULT: 0x8007370A.

Originally when installing the latest version of Parallels Desktop 4, I experienced the problem described in Parallels Knowledge Base article 6317. I used the Cleanup Kernel Extensions utility, and that worked. After this, I booted Vista and went to install Parallels Tools and got the above error. I have rebooted my Mac, Windows, and reinstalled Parallels several times, to no avail.

I am running 10.5.7 on a MacBook Pro, 2.16 GHz C2D, 2 GB RAM. The VM in question is Vista Business 32-bit with a single CPU and 1 GB RAM.

I have submitted a problem ticket, the number is: [Parallels #740335].

 

It seems like a common Windows-related error actually.
I would suggest the following article to troubleshoot the issue: http://blogs.msdn.com/astebner/archive/2004/11/10/255346.aspx

In short, it would be a good idea to back up the virtual machine first (/Users/<username>/Documents/Parallels/<virtual_machine_name>.pvm).
Then, first of all, you can try installing all the Windows updates available, reboot the VM and try again. Also you can try checking, and installing the .NET Framework 1.1 as it is mentioned here: http://support.microsoft.com/kb/839547

 

I followed their directions, then reinstalled Parallels Tools, but Parallels Tools continued to fail to install, with the same error.

 

Issue was completely resolved by support team via ticket in June 2009.