My MacBook Pro finally arrived late last week and I'm loving every minute. One of the first things I installed was Parallels since I have a lot of XP-only apps -- and so I have that fall-back option in the event things get hairy while acclimate to OS X.
I initially assigned a 10GB expanding drive for Parallels/XP, but today I found that after I got my apps installed I was in need of more space. So following Parallels recommendation, I went into their ImageTool application and allotted an additional 10GB. However, XP didn't recognize the new space because it was treating it as a new unformatted partition.
So I searched around and found that others were having this issue, and you had to use a third-party application to change the original partition size. Various Google searches turned up that many people were using PartitionMagic, but it is almost $80 and I didn't feel like spending any money to get it to work.
Eventually I came across a free app called GParted, the Gnome Partition Editor. It's a great program and works as promised, but what I really loved about it was that it has a bootable cd version called LiveCD. In fact, they even have a USB thumb-drive version as well called LiveUSB.
So if you are trying to change the size of your Parallels hard drive, don't spring for PartitionMagic, instead make sure you setup Parallels to boot from a CD and then use LiveCD.