Comment 3 for bug 738345

I reinstalled the same version of Wubi and checked grub.cfg. The lupin entry looks like this:
### BEGIN /etc/grub.d/10_lupin ###
menuentry "Ubuntu, Linux 2.6.38-6-generic" {
 insmod part_msdos
 insmod ntfs
 set root='(/dev/sda,msdos3)'
 search --no-floppy --fs-uuid --set=root 8654915254914639
 loopback loop0 /ubuntu/disks/root.disk
 set root=(loop0)
 linux /boot/vmlinuz-2.6.38-6-generic root=UUID=8654915254914639 loop=/ubuntu/disks/root.disk ro quiet splash
 initrd /boot/initrd.img-2.6.38-6-generic
}
Apart from changing the target partition it shows that the grub.cfg changed after the install - the original entry looks like the traditional wubi entry, but then running "sudo update-grub" changes it to this:
### BEGIN /etc/grub.d/10_lupin ###
menuentry "Ubuntu, Linux 2.6.38-6-generic" {
 insmod ext2
 set root='(/dev/loop0)'
 search --no-floppy --fs-uuid --set=root b4c80465-f6f6-4e88-a1dc-0321acfe292f
 loopback loop0 /ubuntu/disks/root.disk
 set root=(loop0)
 linux /boot/vmlinuz-2.6.38-6-generic root=UUID=8654915254914639 loop=/ubuntu/disks/root.disk ro quiet splash
 initrd /boot/initrd.img-2.6.38-6-generic
}

So I don't think this is a lupin script issue, but rather a grub2 issue.