Here is an updated method, with plenty of screenshots, for
moving a virtual machine from Parallels Desktop for Mac (build 3118) to the
current VMware Fusion beta
(Release Candidate 1, build 50460). The technique uses VMware Converter 3.0.1 (build
44840),
which is a free download and is free to use in the manner required here.
I have tested the method with virtual machines created both under Parallels Desktop 2.5
(build 3118) and under 3.0 (build 4128).

If you saw the beta4 or earlier versions of
these instructions, read on; this version results in a tidier virtual machine.

Limitations of this technique:

• Like VMware Converter itself, the technique only works with Windows XP,
  
  2003, 2000,
  or NT4 virtual machines. It doesn't work with Linux virtual machines, and it
  
  also doesn't
  work with Vista VMs.
  
• Your virtual machine must contain an NTFS file system with at least 300 MB
  of free space.
  
• If your copy of Windows was not licensed with a volume-license key, it
  might demand to be reactivated when it is booted up inside VMware Fusion.
  
• Downloading VMware Converter, although free, requires answering a small
  number of marketing questions.
  
  

This technique requires some type of file sharing between your virtual
machine and the host Macintosh. You may use either a network share or
Parallels Shared Folders. On my iMac, I found using a network share faster;
your performance may vary.

Regardless of how you plan to communicate between your virtual machine and your host Mac,
make sure that your Mac home directory has a Virtual Machines subdirectory. Create
one now if none is present yet.

To use a network share, you must enable Windows Sharing on your host Mac.
Click on System Preferences in the Dock and choose the Sharing tool. Enable
Windows sharing, and ensure that your Mac login is shared.

Notice the text near the bottom of this window:

Windows users can access your computer at \\192.168.130.96\brice

This sentence shows you your home directory's network path, also known as a
"UNC path" or a "whack-whack path". These instructions will use this network path later to allow VMware
Converter to write virtual machine files into your Mac's home directory.

Now log into your source Parallels VM as Administrator or as a user with

administrative privilege. Here's a screenshot of my VM after I logged in.

If you plan to use Windows file sharing, confirm that your virtual machine
can mount a Windows file share from the host Mac. Otherwise, confirm that
Parallels shared folders gives you access to your home directory.

You are now ready to download VMware Converter into your virtual machine.
Download Converter from http://www.vmware.com/download/converter/ and run the installer.

When you launch the installer, you'll see this screen:

Disregard the text under the lightbulb. Use of
Converter in the mode it describes requires buying an enterprise Converter
license, which is not necessary for this purpose. Just click Next.

Proceed to accept the license agreement, and do a typical (default)

installation.

When you run VMware Converter for the first time, it will invite
you to type in a license code:

You don't need a license for this procedure. Just click Continue in Starter Mode.

Launch the Import Wizard.

The first step is to specify the source machine. Tell Converter that you
want to image a "physical computer," even though you plan to image a virtual
machine (the present one).

In the resulting screen, pick "This local machine".

When you click "This local machine," the Authentication boxes get grayed
out. Converter assumes that you are running with administrative privilege.

Next Converter will query your source machine for what disks it has. My
Parallels VM has only one disk, its C: drive.
That's the one I want to clone.

In the next screen, tell Converter that you want to create a "standalone"
virtual machine.

Now Converter will ask you for a name for your new VM, as well as where to
write the VMware virtual machine it'll create from your Parallels VM.

Choose a temporary name for the virtual machine; this example uses
"Imaged from Parallels VM." There will be an opportunity to define
a new name later that reflects the purpose of the VM.

If you
enabled Windows file sharing
on your Mac, put in a network path that points at the Virtual Machines subdirectory of
your Mac home directory, as shared by the Mac. Recall the network path you learned above
from Mac OS's Windows Sharing tool. Append Virtual Machines to it, such as
\\192.168.130.96\brice\Virtual Machines. That's where you're going to
write the new virtual machine on the host. (If you plan to use Parallels

Shared Folders instead, enter a path such as
\\.psf\sharename\Virtual Machines,

where
sharename is the name of your shared folder that points to your Mac home directory.)

Converter will make a subdirectory in the UNC path you name with the same
name as the VM, and then put its .vmx file and its virtual disk in there.

Pick Workstation 5 as the destination VM type, even though Fusion is

actually
more like Workstation 6.

Now, if you're using a network share, you'll get a popup to supply your Mac

login credentials.

You'll next be asked what kind of virtual disks to make for this virtual

machine. You
may choose either "Allow virtual disk files to grow" or "Allocate all disk

space
now for better performance."
Most users wouldn't notice the performance
difference of preallocated disks, but you might if you plan to do something
especially disk-I/O-intensive in this VM. If you, like me, are always running
out of disk space, "Allow virtual disk files to grow" will be a good choice.

You cannot uncheck the box marked "Split disks
into 2 GB chunks," but it is a good choice anyway.
Dividing disks into 2 GB chunks means that
they can be safely stored in a FAT file system, such as many Mac users
have on their external hard disks.

Next Converter will ask you to confirm the network configuration for the
new VM.

The next screen will ask you whether you want to customize the VM after it
reboots using
sysprep, which is Microsoft's tool for
automatically changing the security ID and the computer name of a clone of a
Windows image.) You're just migrating this VM from Parallels to Fusion, and
you don't plan to run the source and the destination at the same time (which
would require the purchase of an additional Windows license unless you have a volume
licensing agreement). Therefore there is no need to customize.

Notice that that screen does not offer you the chance to install VMware
Tools in the new VM. It's just as well, since you need to install
Fusion's version of VMware Tools after the conversion.

Finally you're at the last screen of the wizard. Converter summarizes what
it is about to do.

For me, the transfer only took a few minutes.
Here's what it looked like in progress:

When the transfer finishes, shut down your Parallels VM, and exit Parallels Desktop.
(If you don't shut
down
your Parallels VM before starting up the Fusion VM cloned from it, you'll be in
violation of your Microsoft license agreement unless
you have a volume license. Also, depending on your VMs' network configuration,
you might get a "duplicate computer name" or even a "duplicate IP address"
warning.)

At the destination you specified on the host, you will find a new directory
(in our example, one called "Imaged from Parallels VM") containing several
.vmdk files and a
.vmx file. VMware virtual machines'

.vmx files are text files that govern how they are built.
You will discard the .vmx file created by Converter and replace it with
one created by Fusion. But you will retain the virtual disk (the .vmdk files).

Use Finder to open the subdirectory of your Virtual Machines directory where
the new virtual machine was just written. Delete the .vmx file, but leave all
other files intact.

Now create a new virtual machine, using the virtual disk that Converter
just created for us. From Fusion's "Virtual Machine Library" screen, click the New
button.

The resulting wizard first asks which operating system you "will install" in your
virtual machine. You have already installed an operating system in your virtual machine;
regardless, tell the wizard which.

Next you will be asked the name and location of your virtual machine.
Choose a descriptive name for your virtual machine. This name must be different from
the temporary name you gave Converter.

The next screen is where, ordinarily, you would create a new virtual disk. But
you want instead to use the virtual disk that Converter built for you. So click the
gray triangle next to "Advanced disk options"; click the checkbox for "Use an existing virtual
disk." In the dropdown below, select "Other..."

In the resulting file-selection dialogue, navigate into the virtual-machine directory that
Converter made for you--the one from which you deleted the .vmx file. Point
Fusion to the .vmdk file with the shortest name.

When you choose this .vmdk file, Fusion will ask you whether you want to convert
this virtual disk to the newest format. At the present time, there is no benefit to doing so. Click Keep
to leave the virtual disk alone.

If all went well, you will be returned to the virtual-disk selection screen, with the virtual
disk that Converter made for you selected.

On the finish screen, clear the checkbox labeled "Start virtual machine now."

Then click Finish. Fusion will create the new virtual machine for you,
with a .vmx file that points at the virtual disk Converter made. This new .vmx
file will not be in the same directory as the virtual disk it points to, but this oddity will
cause no problems. Of course, if you need to make a back up of this virtual machine, back up
both directories.

Fusion will leave you in the Settings dialogue for this VM. Click its OK button.

Now power on the virtual machine using the big gray button. If you get a message
warning you about the presence of SCSI virtual disks in this virtual machine, click the checkbox
for "Never show this dialog again" and dismiss it.
The condition is harmless.

Allow the virtual machine to boot all the way up. Unless your VM does so automatically,
log in as a user with administrative privilege.
There will be a long spasm of newly detected hardware; let it die down before
proceeding.

You will notice that mouse movements in the virtual machine are now
somewhat slow, and that your mouse focus seems to get stuck inside the virtual

machine when you click in it. Shortly, you will install VMware Tools, which will relieve both these

issues. In the meantime, press ctrl-cmd to get your input focus out of the

virtual machine, and click inside the virtual machine's window to put input focus back in.

Anytime you see a screen asking you to search for drivers, press Cancel to abort it.

If Windows asks you to reactivate, decline the opportunity to do so for now. It will be
much easier to reactivate when VMware Tools has been installed.

Finally, Windows will ask you for permission to reboot. Say Yes.

After the reboot, log in once again as a user with administrative privilege, if necessary.

It is now time to install VMware Tools, which, among other benefits, will supply an

accelerated mouse driver.

To install VMware Tools, press ctrl-cmd to get your mouse focus out of the

virtual machine, then pull down Fusion's
Virtual Machine menu and choose
Install VMware Tools.

The VMware Tools installer will launch inside the

virtual machine.

VMware Tools installs a number of device drivers. If Windows asks you whether you want to
install an unsigned

driver, click on

Continue Anyway or
press C.

Install all the parts of VMware Tools, even those you don't think you need

right
now.

The VMware Tools installer will ask whether it may reboots your VM. Allow it to do
so.

Now your VM is ready for use. You

now have convenient mouse operation, the ability to operate in full-screen

mode, access to virtual-machine files and applications, the use of Unity, and the use of high-speed USB 2.0
devices. If you install the Boot Camp
drivers in your guest operating system, as outlined in the Fusion documentation, you will
be able to use the iSight camera and other Mac-specific devices.

You may be tempted to remove Parallels Tools. In my judgment, at least for
Windows XP, it is not

worth the effort. Parallels's uninstaller will not work unless it is running

inside a Parallels virtual machine, so you cannot uninstall Parallels Tools

after the migration to Fusion. On the other hand, if you uninstall Parallels

Tools from the virtual machine while it is running
under Parallels, you will
find it extremely difficult to run any application, including VMware Converter.

I recommend simply removing Parallels's desktop shortcuts after the migration

is complete.

When you shut down this VM, you will notice that it does not power off all

the way. Instead, you'll be left at a screen
like this one:

This is because Parallels's virtual machines, unlike VMware's, do not
support the ACPI standard for power management. To power off the virtual
machine, or use the Power Off menu item in Fusion's Virtual Machine menu.

There are two ways to allow the virtual machine to shut down completely. If
you do not plan to equip this virtual machine in the future with two virtual
CPUs (instead of the default one), you can add a statement using a text editor
to this VM's
.vmx file while the VM's virtual power is off with a text editor
such as BBEdit or textwrangler. (If possible, avoid using TextEdit on
.vmx files, because it can

inject formatting errors if you cut-and-paste in the wrong way. See the Fusion release
notes for more detail on this topic.)

To navigate to the .vmx file using Finder, you will need to open up the package
that contains it. If you called your virtual machine "My XP Work Environment," you will
find an entry in your Virtual Machines directory with that name. Ctrl-click on it and
choose "Show Package Contents."

Once inside the package, you will see the .vmx file. Ctrl-click on it and open it
with your preferred text editor. (In the "Choose Application" dialogue, you will need to change
the list of applications from "Recommended Applications" to "All Applications," so that your
preferred text editor will be offered to you.)

Using the text editor, add this line:

gui.exitonCLIHLT = "TRUE"

Now your VM will shut down cleanly.

The other way to get the VM to shut down cleanly is to change its HAL to an

ACPI HAL. Microsoft does not support
changing Windows XP HALs from non-ACPI to ACPI except by reinstalling Windows.

You are not required to do a clean install; rather, re-installing XP on top of

an existing installation will suffice. You may need to press F5 during the

non-GUI portion of the reinstall, when the Windows installer is prompting you

to press F6 for new drivers, to choose a new HAL explicitly. Windows XP will show
you a scrollable list
of HALs to choose among; the scrolling window is only two lines high, so you must
use the arrow keys to explore the whole list. Choose ACPI

Uniprocessor HAL if you wish this VM to run with one virtual CPU, or ACPI

Multiprocessor HAL if two. (To get multi-CPU operation, you must also edit the

settings of this virtual machine in VMware Fusion, setting the number of CPUs

to two.)

Please post any comments or feedback on this procedure.