As soon as Parallels 3.0 introduced the Explorer tool, letting you get inside your virtual drive images without running the installed virtual OS, I began to wonder: exactly how are they doing that? A few forum threads and a couple of serendipitous error screenshots later, I have an answer -- Parallels 3 includes a build of the MacFUSE project, Google's open source version of the Linux FUSE filesystem extension libraries. With MacFUSE (and the GUI version, MacFusion) you can quickly mount 'disks' that read from SSH, FTP, Spotlight queries, or even files stashed in the quirky gmailfs Gmail storage hack. Very nice to see the efforts of the Google coders making it into a high-profile commercial app.
Here's the teensy little problem: Parallels is using version 0.3 of the MacFUSE libraries, and the current version is 0.4, so anyone who has installed the latest build of MacFUSE and tries to upgrade to Parallels 3 is going to run into the troubles. While the speed coders at SWsoft's offices are undoubtedly going to upgrade to the latest tools sooner rather than later, your best bet is to uninstall MacFUSE if you plan to use Parallels until the incompatibility is cleared up.
Thanks Rich & Aron