I downloaded the Ubuntu 12.04 ISO onto my vista laptop. I then used UNetbootin to copy the ISO over to my USB. I removed the odd vault software from the stick first.
Windows can now see 19 icons on the USB - 9 folders and one called Wubi. With Bios set to read from usb I get:
No Default or UI configuration directive found
followed by a flashing cursor. Does formatting the USB in FAT32 or NTFS make any difference?