Would that same network path work in Windows directly? In other words, you should be able to open up that very same path outside Converter. If it doesn't work when you type it in at the Run prompt, for example, it also won't work in Converter.
Maybe your Parallels VM's network adapter is disconnected, or its network mode is set to Host-only. To check, look at Parallels Desktop's Devices menu, and open up the submenu for "Network Adapter 1." If you see "Disconnected" checked, choose "Connected." If you see "Host-only networking" checked, choose "Shared networking" or "Bridged networking." Then, inside your VM, tell Windows to release and renew its IP address. (To that, get a Windows command prompt with Start -> Run -> cmd, then give the commands "ipconfig/release" and then "ipconfig/renew".)
If that doesn't help: you aren't by any chance trying to convert a Vista VM, are you? By default, Vista won't connect to third-party Windows shares like those from the Mac. But the point is moot because VMware Converter is not presently capable of converting Vista VMs.
