Same on a Dell Inspiron 1420 using Oracle Virtualbox 3.2.0 on Ubuntu 10.04. 
Host is a 10.04 (64bit), Guest is a 10.04(32bit).
The full error message is "The installer encountered an unrecoverable error. A 
desktop session will now be run so that you may investigate the problem or try 
installing again". Tried to reinstall several times.

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[Wubi 10.04] The installer encountered an unrecoverable error and will now 
reboot
https://bugs.launchpad.net/bugs/575568
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