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Mount external drive as Parallels shared folder

I would like to set a mounted external drive as a parallels shared folder so it is accessible in the Windows XP virtual machine in Parallels.

Is this possible, and if so, how?
2 Solutions
There are two ways to do this. The first is to capture the device as a USB device available to parallels only. This will reserve the hardware for the period you do this for the Parallels system only. You will need to format the drive in a way that Windows can access (eg FAT32).

The other way is to do this the same way you would make any Mac folder into a shared folder.
Details are on page 207 of the user guide:

Setting Up a Shared Folder
Setting up a shared folder requires two steps:
1) Make sure that Parallels Tools are installed in your guest OS. See Installing Parallels Tools (page 84) for detailed descriptions on how to do so in a particular guest OS. We recommend that you perform the typical installation, but if you perform a custom installation, make sure the Shared Folders tool is selected.
2) Add a shared folder(s) to your virtual machine configuration.

See below for detailed instructions.
Adding a Shared Folder
1) To open the Configuration Editor, choose Virtual Machine from the Edit menu.
2) In the Configuration Editor, select the Shared Folders tab (see the Shared Folders (page 168) topic). Select the User-defined folders option.
3) Click the (Add) button.
4) In the Add Shared Folder dialog:
- Specify a name for the folder which will appear in your guest OS in the Name field.
- Specify a folder in your Mac OS X file system that will be shared in the Path field.
- If you want to restrict writing to this folder from inside the guest OS, select the Read Only option. You will be able to save files to this folder in the Mac OS X only.
- Make sure the Enabled check box is selected and click OK.
5) Click OK in the Configuration Editor.
6) Start your virtual machine and view shared folders in the guest OS.
Eoin OSullivanConsultantCommented:
Open Parallels ( I assume you version 3.0) .. in the configuration for the Virtual Machine .. you can add multiple folders ..
Just create a folder on the USB external drive and share it.

** Just be REALLY careful about un-mounting it while the Virtual Machine is running **
butterhookAuthor Commented:

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