MacWindows.com found a possible fix for the problem with Windows crashing with Parallels Tools 3.0 installation.  They write:

We found a suggestion at VersionTracker.com that claims to solve the problem of Parallels Desktop 3.0 crashing Windows while installing Parallel Tools. Previously, many readers told us that back-grading to the previousl version stopped the problem. John Steele is onle of many who described the problem:

I upgraded to Parallels 3.0 and ever since, the Parallels Tools installer comes up when I restart Windows. If I try to do the install, Parallels crashes every time.

The VersionTracker fix, by Desmond Foulger, includes this suggestion:

I have definitely tracked it down to that part of the installation that is contained within the installation of Shared Applications. I cured it by booting [the Mac] into safe mode with networking (Press F8 at start-up) and navigating into /Program Files/Parallels/Parallels Tools and removing to the Recycle Bin, the whole contents of that folder. Next restarting normally, Win XP comes up normally. Next Install Parallels Tools using a custom install. By a process of elimination I found that installing everything EXCEPT Shared Applications provided the fix.

If this works for you, let us know.