Six Wubi rules

These are my Wubi rules to make your experience trouble free... hopefully:

1. Never force shutdown the computer while Ubuntu is running. Linux has a built-in safe-reboot option that you should familiarize yourself with upfront: Alt+SysRq R-E-I-S-U-B. If that fails and it's totally hung up (no hard drive activity light) then you have no choice, but to hard-reset. But first make sure you entered REISUB correctly.
2. Don't change the boot order from Windows to Ubuntu, or shorten the timeout. Windows is the host operating system and it should take priority or you might fall into a fairly common trap that leaves only the Wubi install bootable. When you want Ubuntu to be Number One, then you can install a normal dual boot or replace Windows.
3. Create a Windows Repair CD before you need it. It will help if you don't follow the advice in Rule 2. Also, you can repair NTFS (using chkdsk) from a Windows repair CD, but not from Ubuntu.
4. Have a good data recovery plan. If you don't have a Windows Install DVD, make sure you create Windows Restore DVDs. When you start to play with multiple operating systems and, later, partition, you want to have good backups. Also, if you don't follow Rule 1, or you have hardware incompatibilities, you could lose data on the Wubi install. So backups are important. 
5. Don't migrate data to your Wubi install. Wubi uses a virtual disk, a large file. Moving personal photos, videos, music from your Windows host to the Wubi install is like combining all those individual files into a huge, single file archive. So your risk of data loss just went up exponentially. It's totally unnecessary to move data that is easily accessible on /host or other NTFS partitions. And on top of that, data on the virtual disk is not (easily) accessible from Windows. Obviously there's some data that has to be on the virtual disk, but don't blindly copy everything.  Make use of the free Ubuntu One service to automatically synchronize backups of your important folders.
6. Be very careful going for help when you get stuck. Sometimes it's critical to mention you have Wubi, sometimes it's not. Knowing the difference is not always clear so it's safer just to state it up-front. Remember that most hardcore Ubuntu users and developers don't use Wubi, so consider all advice carefully. Anything to do with installing Grub, bootloaders, reinstalling Ubuntu from a CD, wiping partitions... are likely to be invalid and will damage Windows - and this is the most common advice given to Wubi users. Remember that Wubi does not have a hardcore base of experienced users so proceed with caution...

So that's about it. Some people choose to use Wubi long-term - or once they start using it they don't see the need to switch to a normal dual-boot. Personally, I'd recommend switching to the normal dual-boot, but if you follow the above advice you're at least  minimizing risk to yourself.

I have already given other advice on how to upgrade a wubi install here, and how to take a fully-bootable backup of your Wubi install here, so haven't included these here.

Boot-repair and Wubi

Boot-repair is a product that has appeared in the past year or so and has speedily been incorporated in community-editable support documentation (basically all Ubuntu documentation). There's no question that the author has put a lot of effort has gone into creating and maintaining Boot-repair and it has apparently been embraced as a very useful tool by the community at large.

But I wouldn't recommend it for Wubi installations and here's why...

Wubi boot problems are different
There are some key differences in the way that Wubi boots. It uses the Windows boot mangler, not the bootloader in the drive MBR to boot. So that's the first thing to check... do you actually have boot problems or is it something different?

If Windows boots okay then boot-repair is not for you
As mentioned, Wubi boots via the Windows boot manager (yes that was a deliberate typo before). So technically your computer boots okay. Boot-repair is more concerned with the boot mechanisms that occur prior to the Windows boot manager showing e.g. the bootloader (drive MBR), the boot flag, etc. So running it isn't going to help. In one case it has stopped Windows booting. To be fair to the author, the problem mentioned in that thread has apparently been fixed, but I'm not sure that boot-repair is mature enough to handle all the myriad of Windows configurations out there.

If Windows doesn't boot, then you should use Windows Repair instead
As stated before, if you do have issues with Windows, then your best bet is a Windows repair disk. Windows repair is an official Windows repair mechanism supported by Microsoft, who hopefully understand their product.

If Wubi isn't booting then probably you need to run chkdsk
This cannot be done using boot-repair, only through Windows or Windows Repair. The most popular post on this blog is all about the damaged root.disk. This is by far the most common problem with Wubi installs, and the first thing you should consider when you have issues.

What Boot-repair will do
Boot-repair detects Wubi installs and will fsck the root.disk (fsck will fix any ext4 file system damage on the virtual disk). It's not always clear to new Ubuntu users how to do this, since you need to create an Ubuntu CD/USB, boot from it, mount the partition containing the root.disk and then fsck it. There are many guides on how to do all this, but of course it's easier to have this all automated for you.

Summary
I have no doubt that boot-repair has helped many people - and there don't seem to be too many misgivings about it out there in the community. But at the same time, in my opinion, it's been incorporated too rapidly into the official documentation e.g. here without sufficient warning that the tool is not officially supported by Canonical, and in some cases, might be classified as experimental.

Xubuntu option to be removed from Wubi

It looks like Xubuntu will no longer be offered with Wubi, from release 12.10 onwards.

I was browsing the Wubi code the other day and noticed this revision: Drop Wubi for Xubuntu at the request of Pasi Lallinaho. Pasi Lallinaho is the project lead for Xubuntu: https://wiki.ubuntu.com/PasiLallinaho/

Xubuntu is typically used on lower spec hardware so it's probably not a big surprise to see this move. The minimum requirements for Xubuntu typically are lower than that of the Ubuntu installer (ubiquity) so in some cases the Wubi install would fail when a normal Xubuntu install would succeed. But I don't know the real reason behind this move.