This error means some files in %appdata%\Parsec that are used for 32-bit games are missing, because Parsec can take a while (up to 40 minutes while Parsec is idle) to add them to the folder. This behavior will be fixed in future versions of Parsec.
In the meanwhile, if you want to fix this without waiting 40 minutes, follow the instructions below:
- Download the portable version of Parsec
- Extract the zip into a folder and open the folder
- Run parsecd.exe once. This will update the files in the portable folder to newer versions
- Click the Quit button in the bottom-right to close the portable version
- Copy the appdata.json and parsec-XXX-XX.dll files in the folder
- Press Windows key + R
- Paste %appdata%\Parsec onto the new window and press Enter
- The Parsec AppData folder will appear. Create a folder called windows32 inside it
- Inside the windows32 folder, paste the json and dll files you copied previously
After the files are placed into that folder, the error should be fixed. Restart the game and try to host again.