By live-disk install, are you talking about
dual-booting or some kind of persistent live
usage? I've only tried wubi once to see how
it was, and don't remember much about it.

I have an old celeron-1ghz machine and had tried
a hdd install of Ubuntu, but it was a little too
slow for me, so I put pclos on that one. It wasn't
that bad, but compared to my other Ubuntu P4 2.4ghz, it was.

You could try instructions from the Pendrivelinux
site about doing a persistent usb-drive install,
or moving your Wubi installation to an external
harddrive as options:

http://www.pendrivelinux.com

For a small, fast Linux alternative, you might want to try PuppyLinux. 95M
download. Very good on older machines.

For your spec, I would suggest Xubuntu whichever route you take you'll
get a leaner install.

I have Xubuntu 8.04 wubi on a laptop and it takes a while to load up
but thereafter runs fine. I think writing to hard disk either to other
OS partition or Xubuntu home (wubi) to saving files would be easier
via wubi. add an icon on desktop to access usual C drive (ntfs on
other OS is also OK)