@snep From what I remember, neither – it created a large loop image containing the ext3 root filesystem in C:\. (The initramfs did a dance to mount the NTFS partition using ntfs-3g, then loop-mount the Ubuntu rootfs at /, then move the NTFS mount to /host.)

(It also booted using Grub4dos chained *from* NTLDR, rather than the commonly done opposite, so users only saw the familiar Windows boot menu and it was much less likely to break.)