EVAL Apparently the manual upgrade process requires three restarts, and the failure message is unclear. Ignore it, and click OK, then manually start the upgrade process from the virtual CD, you will see the four stages proceed, one after each restart once you get the "Upgrade failed" error. I still had to manually install Parallel Tools after that (even though the upgrade screen indicated that it was doing this as part of step 4). Windows XP displayed an error saying that the hardware has significantly changed, and required re-Activation, which failed.
(Version 4.0.3522)