Parallels & XP 101

take a look at the stickies a the top of the page specifically this one http://guides.macrumors.com/A_Beginner's_Guide_to_Running_Windows_on_a_Mac

I had a few woes you can avoid as I just installed Parallels 3.0 with XP Home on my iMac 20 with 4GB total RAM.

1) I had issues with "DirectX" enabled in Parellels, I turned it off after some testing and now know VMware Fusion 1.1.1 is the better choice if you want to virtualize your XP and run games that support DirectX 9.0 and basic 3D rendering.

2) If you need to re-activate XP after install, don't freak out, do the telephone option after attempting to activate. Call the number, it's automated, answer so that you're updating one computer, XP was previously activated, and the reason for the upgrade is a major hardware change. Then just read all those numbers and then insert all the new ones it gives you. You're not talking to a human, works 24x7, and is painless.

-jim