Okay, I'll admit, this is due to my own stupidity, but probably worth mentioning so better error correction can be put into Parallels itself. I created an expanding drive, and needed more room. I had tried to get (via BootCamp) an installation of WindowsXP to boot off an external drive, but I never did get that to work. However, I had a nice big and empty partition available so I thought I'd just move my Parallel's virtual drive file over there. When using Parallels after a while of moving data to the drive I would get instant crashes when I tried to copy, delete, or do almost any file operations on that drive. Strange, so I re-created the drive and started copying everything over again. All was fine for a while, and eventually I hit the same brick wall. The error was strange in that the VM just quit, but the Parallels app was still running, and no crashlog or other information that I could find about what happened. So, I thought, there may be some drive error... I tought I would create a fixed drive image to see if the whole file could be created without error. At some point along the way, I get error -27: file too large. Hmmmm..... It finally occurred to me that I had used a FAT32 partition and I don't think it supports single files of 20GB, the max is ~4GB. So, when using an expanding disk image it would be fine until it hit that wall, and Parallels didn't know how to cope with it. I reformatted the parition as HFS Extended (Journaled) and all is working great.
