Do you have experience using Wubi and if so, what are the major pros and cons ? I am of course particularly interested in potential problems.
If a computer needs to have Linux installed temporarily, Wubi is easier to remove without leaving obvious traces. Without Wubi, you need to re-enlarge the Windows partition and restore the Windows bootloader. With Wubi, you just use the supplied uninstaller. You can even temporarily hide the Ubuntu entry from the Windows bootloader.
For someone who wants to try out Linux but is afraid of harming Windows, Wubi is less scary.
Suppose a user has a computer with Wubi, has upgraded something but isn't sure what, is thousands of kilometers away, and phones you because his computer won't get past the bootloader stage. What next? There are far fewer resources about troubleshooting Wubi than with traditional Grub-based dual boot.
Similarly, if you need to troubleshooting or rescue the system with a live CD, Wubi reduces your options.
Increasing the size of the Wubi partition image wasn't supported last time I looked.
Wubi induces a small performance loss. (But if you're even considering Wubi, you probably don't care.)
If Windows screws up its filesystem, you lose Linux as well. (Though I get the feeling NTFS is reliable these days.)
Only use Wubi if you have a compelling reason.
If you're new to Linux and aren't sure you want to keep it, you can go ahead and use Wubi. But consider this a temporary installation, don't invest into it. If you find you want to start customizing things, or if you run into any technical problem, throw the Wubi installation away and start over a proper partition. It won't harm your Windows partition (in fact, it will affect your Windows installation even less than Wubi).
If you have a specific concealment requirement for political reasons (“we don't want no stinkin' Linux on our network”), Wubi is viable, but not necessarily hassle-free.
Note that for hesitant or discreet installations, an alternative in some use cases is to run Linux in a virtual machine: either coLinux (a virtualized Linux running on Windows), for example with andLinux (Ubuntu on coLinux); or a more general VM technology such as VirtualBox or VMWare.