isn't "install ubuntu within windows" virtualization more than dual boot?

It isn't virtualization as there is no VM server. It mounts a Windows
compressed file as a drive using a loopmounted boot device. It may sound
picky, but there is no virtualization and as such there is no slow down in
performance. It also does not need Windows other than to install it and
remove it. When you boot in to Ubuntu using Wubi then you are 100% Linux.
BTW, if you use Wubi then it is agood idea to defrag your drive first or the
performance will be bad.

If you have an XP update CD it should work OK

I was wondering it it would break the ubuntu install or messing up the
boot program ( grub) i think?

Yes as you say it will do that so I suggest you format that partiton and
install XP clean and than install Ubuntu next again.

I have just installed 'Jaunty.iso' on sdb1 works ok and it ZAPPED my XP and
evrything on a separate drive (sda)

Do a complete BACKUP berfore you start!