How to run multiple displays in the extended desktop mode in Coherence?

Symptoms

I want to run extended desktop of Windows XP in Coherence mode. But the message appears:

Unable to switch to Coherence Mode. Primary operating system does not support screen resolution requested by guest operating system. Select another resolution for the guest operating system or review your video system configuration.

Resolution

To be able to work in the dual monitor mode:

1. From the View menu, choose the "Customize..." option.
2. Open the "Coherence" tab and check the "Use multiple displays" option.
3. Then open Parallels Desktop and go to Preferences -> Appearance menu.
4. Check the "Change Mac OS X resolution" option.

After that please check the resolutions of the monitors that you will use. Change the resolutions of both monitors to be the same. (E.g. if you have a Macbook, change the image to 1024 x768 stretched to match the standard square monitor (4:3 viewing ratio).