My OpenStep VM that worked beautifully under Parallels 3.x doesn't boot in Parallels 4.0 -- it hangs at the 'plug and play' stage in verbose booting.
I think it may be to do with the fact that VT-x is turned permanently ON.
Sadly, you can't run Parallels 3.0 and 4.0 on the same computer.
Maybe if we had a concerted campaign on their forums?
Just noticed, I get the message (after OS 4.2 starts to boot and after memory sizing)
"VBE Mode 305 not supported. Using VBE mode 257 instead."
That wasn't there with Pllels 3.0.