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0e1f616
(Get the code!)
It's most likely a problem with running Wubi inside a VM. On bare metal, the Wubi install works fine, as has been tested by several people during the Lucid cycle. It does, however fail to run in VirtualBox. In that case, we've tested it both with Sun's VBox and with -OSE from the repositories, with the same results each time...
I have NOT tried it with VMWare or KVM, however, so there may be a difference there, but at least with VBox, Wubi doesn't work.