Second question.. Can I use the “my book” external hard drive to back up both the Mac and the PC by installing the software on both sides of the computer.  I may try that when I hear back from you.   Thanks

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For backup, if you begin using time machine on the mac side, you'll actually be backing up the PC side although not in exactly the same manner.  Where time machine allows for individual files to be recovered from various versions from the past, the PC image inside VMware or Parallels will back up as one large virtual machine file.  Several gigs large.  This is fine overall but if you want to truly back up the Windows machine with windows software then you'd need seperate software to do that.  But to answer your question, time machine requires a mac formated hard drive os x extended journaled.  Time machine will not work on a MS-DOS formatted drive.  The mac will read the FAT-32 formatted drives but time machine will not work.  So if you're not going to rely on time machine to back up your virtual machine and want more control over what is being backed up within that virtual machine, then you'd really need two drives.