This tip was pointed out by Jason Piper...
The challenges are as follows:
1. Backup your Boot Camp partition and convert it into a VM .hdd file.
2. Repair your Windows install so that it can work under the significant hardware change
The process is as follows:
1. Boot on Windows and clone your drive (I used the evaluation version of Snapshop
1.1. You will need lots of disk space for this. In my case I had to save the snapshop files on my mac partition (through MacDrive)
1.2. This snapshot file will have to be made available to a Parallels VM so put is somewhere you can share it through Parallels Shared Folders.
2. Create a new virtual machine in Parallels and install Windows on it. Once it boots, install Snapshop.
2.1 Configure "Shared Folders" to make your snapshop files available to your new VM.
3. Create a new HD for your newly created virtual machine. Make sure it is as big (or bigger) than your Boot Camp partition.
4. Configure the new drive within Windows. For XP, instructions are available here: http://blog.kevindonahue.com/archive...tall_addit.php
5. Once your new virtual drive is available, open Snapshop and restore your Boot Camp cloned drived onto your 2nd hard drive.
6. Create a new Parallels VM that will use your virtual HD that now contains your restored Boot Camp partition.
7. You are not out of the wood yet... If you try to boot the new VM, it won't work. You need to boot from your Windows install CD and and enter the repair console to repair your Boot.ini file. Instructions on how to do this are here (follow method 2): http://support.microsoft.com/kb/314477/
8. After doing this, my install still didn't boot (even safe mode didn't work - boot freezed after loading the Mup.sys driver) so I had to boot (again) from the windows install CD, select setup and repair my windows install as per the following instructions: http://www.theeldergeek.com/replace_motherboard.htm
9. Reboot (again) your new VM, install Parallels tools
10. Now if you want to get rid of the Windows selection screen at boot time, you will need to edit your boot.ini file to remove the entry that links to your boot camp partition. Instructions on how to do this are here: http://support.microsoft.com/kb/289022/EN-US/. In my case, all I had to do was to delete the last line.
11. Now you probably open the Add/Remove programs control panel and remove the Mac drivers needed for Boot Camp.
After going through all of this, you will have to reinstall all the windows updates you installed in Boot Camp (the Repair process reverts to the original Windows version) but you should have all your data, applications and settings intact. In my case, everything worked.
Even more details at MacOSHints.