Does Parallels Desktop support hardware virtualization for the client VM? I have a new MacBook pro (I just switched from PC), and an older scanner (a Mustek A3 USB).

The scanner comes with drivers for OS 9 (I assume that's a non-starter on OS X), and Windows XP. 

I have Parallels Desktop 6 running a Windows 7 installation on my MacBook.

Windows 7 comes with "Windows XP mode", a Virtual Machine running XP. This is what I used to run my scanner previously, on my PC.  

However, Windows XP mode refuses to start inside the Parallels-powered Windows 7, complaining that the host machine (ie. Windows 7) doesn't have hardware-supported Virtualization. Whichis Parallels Desktop's "fault" as it's providing the virtual, simulated hardware.

Is there any way I can get Windows XP running on Windows 7 inside Parallels Desktop? Is there some setting I can change?

I guess simply creating a second Parallels VM running XP directly would be a workaround, but I don't have a separate copy of XP handy, and would like to avoid having to buy one.
As the comments have suggested, Parallels does not support Windows XP Mode in Windows 7 directly.

Parallels Knowledge-base article

However, the VMware knowledge-base does list a pair of patches from Microsoft (x86 patch and x64 patch) that remove the requirement for the hardware virtualisation on XP mode which should allow Parallels to also run the XP mode.

VMware Knowledge-base article