Parallels Display Adapter (WDDM) Code 35 on Windows 10 21H2 x86_64

I'm looking to try out the Parallels Desktop 26's new feature "x86 Emulation". I have an Apple Silicon Mac with 8 GB of RAM and M1 chip. I've tried many versions of Windows 10. LTSC 2021, 22H2, 21H2. All report the same behavior. I have tried downloading an older version of Parallels Tools for legacy OSes-18.1.0, but that still doesn't work. What baffles me is that I had tried this feature in Parallels 20.2 when it first came out and GPU acceleration worked perfectly fine, along with the automatic resolution change to fit when resizing the window. None of those work now.

Currently I have a VM of x86_64 Windows 10 21H2 installed, but the version of Windows 10 doesn't really matter. Parallels tools is up-to-date. I have tried to follow the official documentation but there is no effect with that. From what I see, after installation of parallels tools, Windows has to restart, and after a restart, the resolution stays the same at 1024x768, but with a 200% custom display scaling auto-applied by Parallels. This is normal, but the resolution doesn't change and there is no GPU acceleration. I had to change the resolution manually. Resizing the window just blurs it for a bit and stretches even though I have "Resize to fit" in the options enabled. I saw in Windows Settings that it used Microsoft Basic Display adapter. I opened Device Manager and unwrapped "display adapters". It showed "Parallels Display adapter (WDDM)" with a warning icon (orange exclamation mark) in the corner of the icon. Selecting the properties showed that "Your computer's system firmware does not include enough information to properly configure and use this device. To use this device, contact your computer manufacturer to obtain a firmware or BIOS update. (Code 35)" I have searched all over the forums and documentation along with some external sources such as Reddit but had no luck figuring this out. I am using the forum as my last resort, as there is little to no documentation on how GPU acceleration works. I've also tried to force the effects that only work with a GPU by opening "HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Windows\Dwm" and adding a new DWORD "ForceEffectMode" and set it to 2. Upon restarting the OS [or forcefully ending dwm.exe via Task Manager to cause it to restart the process] it only makes the whole taskbar go white [not light mode, fully white with the icons such as the Windows start menu icon being invisible unless hovered over] and in apps like Settings the sidebar which is supposed to have Acrylic transparency becomes fully white.

Has anyone run into the same problem as me? I have been trying to troubleshoot this for days but I've found nothing so far.