SymptomsParallels Tools install correctly without any errors.
Mouse synchronization works the proper way.
On each system start/restart, Windows XP shows "New Device Found" message.
If you go to Device Manager, you will see unknown device under 'Mice and other pointing devices'.
CauseSome system files are missing in Windows XP. For example, the folder 'Driver Cache' does not exist in system folder (C:\Windows) or the contents of the 'Driver Cache' folder are incorrect.
ResolutionThere are 2 possible solutions:
1. On the New device dialog select 'No, not this time' and click Next.
Select 'Install the software automatically' and hit Next.
Choose 'No, do not connect to Internet now' and Next.
Put a checkmark on 'Don't prompt me again to install this software' and click Finish.
2. Shut down Windows XP.
Click on the Virtual Machine option in the Mac menubar and choose Configure.
Select the Hardware tab, the Boot Order.
In 'Boot flags' window type 'devices.usb.enable_mouse=0'
Click OK to save configuration.
Start your virtual machine.