| What Parallels is talking about there is not running the actual Windows Virtual Machine from a FireWire drive, but sharing the files from your Mac stored on a FireWire drive with the Windows Virtual Machine.
You can install and run a Windows Virtual Machine just fine on a FireWire drive with either Parallels or VMWare's Fusion. You could even make a RAID array of USB 1.1 floppies and install the virtual machine there -- and it would run flawlessly... very slowly, but flawlessly.
As a rule of thumb, if you can browse the location (FireWire drive, network drive, NFS export, etc.) with Mac OS X's Finder, then you can install a virtual machine there and run it with Parallels or Fusion.
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