I suggest you use windows chkdsk because it is possible there is file system corruption which is confusing the Ubuntu installer. Here is a link about chkdsk:-http://www.microsoft.com/resources/documentation/windows/xp/all/proddocs/en-us/chkdsk.mspx?mfr=true As you will see from the link, there is an option to use chkdsk with the /r parameter, which will let chkdsk fix any errors found.
Another useful approach is to use the linux tool gparted but from a live CD or a live usb. Here is a link : http://gparted.sourceforge.net/liveusb.php The advantage is that you get to examine the hard disk in isolation. You boot off the cd or usb memory stick, run gparted and then you will be able to check the partitions from menu Partition-->>check. Also, of course, you would be able to shrink the windows partition(s) to leave unformatted space at the end for Ubuntu to install into. If feeling adventurous you could create the Ubuntu partitions prior to a manual install, but that would be another question.
I suppose one further possibility is that your Ubuntu install disc is faulty, rare but possible..... I hope this helps point you in the right direction