You can only upgrade a Wubi install while booted into that install, so either using update manager, or from the alternate desktop CD image (cdromupgrade).
You cannot do it from Windows or by booting an Ubuntu CD/USB.
You can only upgrade to 11.04 from 10.10 - so you'd first need to upgrade from 10.04 to 10.10, but note that there are some problems with the wubi upgrade to 10.10 (bug 653134 and bug 610898). These have been fixed for 11.04, but until the fix is backported to 10.10 you will likely suffer booting problems. You can find a solution for these problems here: Wubi megathread
With any upgrade I recommend backing up beforehand. With Wubi you can just copy the virtual disks (usually just the root.disk) in Windows beforehand. It's a good idea to copy C:\wubildr as well.