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Wake the media, alert the dog. I installed Windows XP Pro into a Parallels virtual machine (VM) today.

Disabling ‘Acceleration’ in the VM was required for successful installation. With Acceleration enabled, the installation kept hanging at the “installing devices” stage (this could be progressed sometimes by forced restarting of the VM) and spontaneously rebooting.

From Problems with installing Windows XP SP0 in VM in Parallels’ knowledge base:

1. Change the acceleration mode of the VM:
2. Open the VM's configuration page. 
3. In the Resources list select Options.
4. Click the Advanced tab.
5. Set the Acceleration level to Normal or Disabled.
After installing Windows XP in the VM, you can change the Acceleration level back to High.
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