Hello all!
TL;DR - you might need to configure 'Do not optimize for Games' in two places per VM, and I'm not sure if this is an issue with other guest OSs than macOS 12.4
--------
I am a new user of Parallels since about a month ago when I got my first MacBook Pro (2019 15" i9 32GB 512GB SSD Vega20)

I recently created a new virtual machine using the macOS recovery partition option in Parallels.
The VM booted-up fine and I installed Parallels tools no problem.
Then I noticed I had an issue where I could not see the mouse in the VM, just like the users in this thread.
When I saw the recommendation to configure 'Do not optimize for Games', I remembered that I did enable that option somewhere, but only because I thought I would need it due to what I experienced with a Windows 10 VM using Excel. It turns out, I don't need that setting enabled for macOS.
At first configuring 'Do not optimize for Games' didn't fix the "missing mouse issue" for me. After I configured 'Do not optimize for Games' in two places in Parallels, the mouse reappeared, and I am using a macOS 12.4 VM without issues!
Here's how I disabled 'Do not optimize for Games' in Parallels:
- Open Parallels Control Center
- Right-click the macOS VM then select 'Configure'
- Select the 'Options' tab on the top then select the 'Full Screen' tab on the left
- Make sure to uncheck 'Optimize full screen for games'
- Select the 'Hardware' tab on the top then select the 'Mouse & Keyboard' tab on the left
- Make sure 'Auto-detect for games' is selected next to 'Mouse'
- Note: The option 'Optimize for games' will cause the mouse to disappear when the VM has focus
- Note: You may also be able to select 'Don't optimize for games', too, but I haven't tried that option
- Note: I didn't change anything on this tab for the 'Advanced', 'Keyboard', or 'Open Shortcuts Preferences...' settings
I hope my experience helps someone else. Take care and cheers!