I guess moaning about Wubi previously pretty much guaranteed it would fail on me, and true to form it has. I don't know if this is actually a Wubi issue or a Gutsy development issue as I haven't had much time to check out reports yet, but I figured I'd present an easy solution for an easy problem, just in case you hadn't done this before.
The backstory is I grabbed the latest package updates (beta Gutsy gives me up to a couple hundred a day) and later ended up hard-resetting the system after a lockup that refused to be fixed another way. At this point serious alarm bells are ringing (especially if you have rebuilt three corrupt partition tables on two machines at various points). Anyway, no corrupt partition table this time, but Ubuntu refused to boot with Grub giving a message about "unknown device string". XP was still fine so I booted into there while I considered my options. Not knowing enough about Grub configuration to fix the obvious error I decided to directly mount the disk image under Windows and grab some files I needed that way. Unfortunately I couldn't make this work as it insisted the image wasn't formatted (I had already installed the Ext2 IFS so that wasn't the problem afaict). In the end I copied the entire image onto my USB drive and took it home, where I used the easy solution:
sudo mkdir /mnt/temp_home
sudo mount -o loop -t ext3 home.virtual.disk /mnt/temp_home
Oh look, there's all my files. One happy Kemp :-) Now to fix the booting problem...