Dear Scott,
I just installed E-quest on my Parallels XP virtual machine, and ran into the same issue as you did.
Since the problem might be associated with the Parallels shared hard drive partition, I recommend you to uninstall the program and re-install it selecting the "all users" option instead of "just me". This way, the "data" and "projects" folder will be located in the C:\ partition of the virtual machine and not in the shared Parallels folders (//psf..).
That did the trick for me.
Regards,
Stefano
--
Stefano Moret