[TomBB]

I see the library/parallels folder (41.5mb) and the home/documents/parallels folder (6.35gb).

And I see that in the folder in the home/documents is teh winxp.hdd (5.82gb) file. I assume this is the actual disk image of your virtual windows machine in its entirety, including the OS and user files.

I wanted to make sure it is being backed up, so I explored what files I could.
FYI, earlier I had to wipe my mac and start over (without SD!). I rinstalled a new system and then copied my own documents back in. I reinstalled parallels and windows xp, and tried to fire up parallels--it couldn't find my files. I then found the windows xp.pvs file, clicked on it and parallels fired backup up to my old files and all.

--had no idea what i was up to but at least if anyone else has this problem they may find this info helpful.