I faced this problem in my friend ACER laptop too.
It happens because windows 7 bootmanager is in a separate hidden partition with some wired configuration for restoration using factory image. WUBI mbr is in directory of some other partition. So the bootmanager of windows 7 couldn't find that and throwing that error.
Possible things you can do are
1) restore Windows 7 using your restoration disk or use ubuntu live to take backup.
Restore win 7
Use some partition manager/ disk management utility to create new free partition.
Install ubuntu onto that using live cd OR usb.
Boot using windows disk to reinstall windows 7.
Use option complete install (not upgrade).
Delete 100MB partition and Windows 7 partition
(Don't delete RECOVERY partition if it is there).
Create a a partition for win 7.
Then click on install button in the wizard.
(Don't click just after deletion, it will again create the same thing as before)
and then use wubi.
But in this process you will loose capability of one touch restore (or similar things) if any.