I installed Windows 98SE under Parallels 1970 and installed Parallels Tools with no problem. When trying out beta 3106 (the earlier ones seem similar), I found that the tools installation hangs. I tried opening PTstart.exe directly and it also hung. Then I started up PrlTools.exe directly and that installed the tools. However, now Windows does not quit correctly and I have to kill the process in Parallels, which means that Windows complains on startup. It looks like the tools work correctly in the limited way supported for Windows 98.
I am running Parallels 3188 and having a similar problem. Although I primarily use XP I set a VM with Windows 98 to run some legacy programs. Same issue as TonyK. I have installed Tools - but cannot get a correct shutdown. As well, I have to use ctrl-alt to release the cursor (just as if tools were not installed). Ok I just checked and it said Tools was not installed. But when I reran the installer it said "setup wizard will reinstall the currently installed 2.5.3188 version". Any suggestions appreciated. MacBookPro 10.4.9, 1.83Ghz, 2GB
The Parallels video driver for Windows 98 is the problem. It's a known issue. See here: http://forums.parallels.com/showthread.php?p=51237 and here: http://forums.parallels.com/showthread.php?t=9923
