We had the same issue about a month ago. We opened a support ticket for it with Parallels but didn't get anywhere because they couldn't recreate the issue. Turning protected mode off didn't work for us. If I remember correctly, we also had the issue on an XP machine running IE 7.
One thing that was interesting, is it would sometimes work depending on how you logged in. For example, we have a client who is a Sitebuilder hosting provider. His clients can log in using "http://sitebuilder." + their domain name. We had the issue you are describing on one of those domains, but we'd switch to a different domain log in and it would work fine. (All log ins were using the same installation of SB.) Once a domain went "bad", we were never able to us IE 7 and Sitebuilder again using that domain's "http://sitebuilder." log in point.
Hopefully someone at Parallels will be able to duplicate the issue and get it fixed. For our work around, we went with FireFox.