That's what I thought when I discovered how it worked. The "WUBI" install type is (was?) a supported install type in Ubuntu. But it's been working fine and I can't think any fundamental reason why it would be unsound.
I should say there have been non-fuse related hitches with the integration with Ubuntu (grub problems).
Or am I being trolled? I'm probably being trolled. I'm being trolled, right guys? Right?