I have: MacOS Big Sur 11.0.1 Parallels 16.1.0 VM = MacOS 10.6 (Snow Leopard) with 8192 MB of memory and 1 GB of video memory. The only graphics resolution that the MacOS 10.6 VM offers me is 1024x768.
Looks like this is a known problem. https://forum.parallels.com/threads/pd-16-1-0-screen-resolution-issue-lion-leopard.351330/