Agostino Russo – original author and ‘inventor’ of Wubi – told me more about how everything was started from a blueprint. More here
Wubi ended up being a mix of point 2 and 3 of the first blueprint [known as UbuntuSetup, now superseded by a newer blueprint called InstallerForWindows]. A guy called Geza Kovacs actually implemented the first prototype which could loopmount a pre-installed image. I later decided to do a full installation into a loopmounted image as opposed to loopmount a pre-installed image and thus Wubi 7.04 was born.