Resolution
After upgrading to Parallels Desktop 4.0, several updates are required for each virtual machine. Normally, they are performed in Automatic mode when you boot into your virtual machine for the first time after the upgrade. This process could take quite a long time to be completed, sometimes up to a half an hour. If the virtual machine upgrade procedure is running but you see no progress, please, do not interrupt it.Your Windows installation may prompt for additional information. If the upgrade seems to have stalled, you can click on the Lock icon to continue the process manually. If there are prompts, please address them so that the upgrade can continue. Also you can meet the following warning message: "You need to manually continue the upgrade process". If the message does not appear after long period of upgrade process being idle, click sumultaneously Control+Command+Option+R combination on your keyboard to envoke the dialog.
Seeing it, please, hit OK and login to virtual machine.
Please, check if any dialog messages are opened, for example:
"The driver you are going to installed is not a signed driver, would you like to install this software anyway?"
Answer the messages if any (in the example shown you are to agree).
When you have logged in, you may see different error messages, pop-up windows such as "Found new hardware", etc (see the list of the most wide-spread messages at the end of the article). Please ignore them. Do not reboot the system unless the virtual machine is completely upgraded.
For further instructions, please, see the following Knowledgebase article:
http://kb.parallels.com/en/5718
Finally the process of Parallels Tools installation will start. Please, do not interrupt it. It will be completed in some time.
Here is the list of most wide-spread messages. If you see them, please, ignore:
# \\.psf <file:///\\.psf> is not accessible
# Mapped network drive is not accessible.
# Found new hardware.
# New hardware is installed. Reboot is required.
# Select new network location
If you still experience any difficulties with upgrading, please, contact the Parallels Technical support Team:
1. submit a free e-mail support request at
http://www.parallels.com/support/desktop/
2. Purchase Phone support at
http://www.parallels.com/store/support/