So you should see an entry for "Windows 7 (loader) (on /dev/sda1)" in your grub menu. It's there and it's pointing at your recovery partition. If you're not seeing it... maybe something is corrupted. But it should be at the bottom of the grub menu.
You could try to boot it manually if you can't see it:
2. Select Ubuntu
3. Hit 'C' when you see the grub menu.
4. Enter the following at the command prompt:
That should boot your recovery partition. What happens after that? If your recovery is successful you won't have Wubi anymore. So backup the contents of /host/ubuntu/disks (i.e. root.disk and other virtual disks if you have any).