Wubi is still on the 12.04 CD but the ability to install inside Windows from CD has been disabled. The only way to do it is to run wubi.exe standalone available here.

For 12.04 they have simply hobbled wubi.exe to not offer the option to install, which you can bypass with a command-line option e.g. if your CD drive is D: you can go to a command line and run:

D:wubi.exe --force-wubi

The intention is to replace wubi.exe on the CD ISO in future releases with a dedicated CD Boot Helper, and then maintain wubi.exe as a separate executable. That appears to be the plan.

Here is the rationale behind disabling it, which was posted by Canonical's Rick Spencer on the ubuntu-devel mailing list:

Hello all,

This email regards wubi, a tool used to set up Ubuntu in a dual boot
configuration in a manner that does not require disk partitioning.
Wubi is a windows program. It is currently delivered as a standalone
executable downloadable from the web, as well as part of official
Ubuntu images. You can read about wubi in the excellent user guide:
https://wiki.ubuntu.com/WubiGuide

I am proposing a small but notable change to how we deliver wubi for
12.04. I am proposing that:

1. We continue to test and bug fix wubi.exe as the separate Windows program


2. We cotinue to offer wubi.exe for download as the separate Windows program.


3. We disable the ability to do a wubi installation from the Ubuntu 12.04 ISOs. (wubi will remain on the images for the purpose of providing Windows users some feedback and functionality if they put a
   Ubuntu CD into a running Windows computer, but won't offer to
   install).

Separating the wubi.exe experience from the ISOs will give us the
following important benefits:

1. We will be able to do maintenance and enhancements to wubi outside of the Ubuntu development cycle.


2. Significant reduciton of QA work for an already over-streched QA team.


3. Better overall 12.04 quality, and less stress at release time.


4. We won't get stuck with a poor (or worse) user experience on the CD since is a good chance that wubi will not work properly with
   Windows 8.

I am proposing these changes to the plan because:

1. The key use case for wubi is being able to download and run the installer on Windows, not installing from the ISO.


2. Wubi is difficult to test, so has been difficult to assure that it will meet the quality standards we have set for 12.04.


3. There are no developers treating wubi as their top priorities. This combined with the QA difficulties has historically caused late
   breaking changes that add stress at release time and frequentily
   invalidate already executed ISO testing.


4. Most significantly, Windows is changing it's boot system with Windows 8, and it's not clear how wubi will work with Windows 8, if at
   all.

Cheers, Rick

Here is the bug report that documents the request to disable install from CD.

Note:
Running wubi.exe standalone will download a preinstalled tar.xz image. You can still place the Desktop CD ISO in the same directory as wubi.exe and install it like that without downloading the ~500MB tar.xz image.