Clone first to play it safe
(This thread belongs in the Windows Guest OS forum, but anyway...)
Mike and others who are not using bootcamp,
I'd highly recommend either backing up your entire parallels VM or cloning it prior to the SP3 update. Then, if there are problems, it is completely painless to restore your previous SP2 system. ;-) I suppose there are snapshots, etc., too, but a complete clone or backup just feels safer in case something happens to Parallels itself due to SP3.
People sharing their bootcamp partition like tintin are in a tougher spot, especially given what tintin describes happened to him. :-(
Cheers,
Karl