I guess this is due to corrupted ntfs(window$ partition ,which window$ can repair if you boot into that thing) partition where the root.disk image reside , which cannot be read from Linux(ubuntu).what you may try is to boot into your window$ ,select the partition where root.iso exists or simply check every partition to be checked and fixed by file system checker(dont know what it is called?) in window$.
remember ,your ubuntu is mounted on /hosts directory!dont mess with that!
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wubi is not recommended.why not install from CD ?too much dependence on window$.
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My Solution is - you download Ubuntu iso ,burn it into a cd and install on a seperate Linux partition(ext3).
Help is here:
Standard installation
To install Ubuntu, you will need compatible hardware and an installation CD. The following guides will help you with these steps.
[*]Check if your hardware works with Ubuntu and meets the minimum system requirements. (see SupportedArchitectures, HardwareSupport and Installation/SystemRequirements)
[*]Obtain an installation CD. (see GettingUbuntu)
[*]If you downloaded a CD image, burn it to a CD (see BurningIsoHowto) and check to make sure it was burned correctly. (see Installation/CDIntegrityCheck)
[*]Install Ubuntu by booting from the installation CD. (see GraphicalInstall)
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