Interesting. An odd rabbit hole. I've never heard of this kind of thing existing before Ubuntu wubi, (though I don't know why that surprises me, it's not like they're was no need for such a thing before that):
> DragonLinux was a distribution of Linux that had the ability to be installed on a loopback file on an existing FAT16 or FAT32 partition.
https://sourceforge.net/apps/wordpress/dragonlinux/
In the readme linked there, it says something different:
> DragonLinux is a Linux distribution which runs on top of windows with no partitioning needed as long as the Windows OS is sitting on a FAT32 partition. DragonLinux is fully supported on Windows ME and below. Work for support with Windows 2000 and Windows XP is in the works.
>
> DragonLinux is a UMSDOS distribution, compared to a Loopback filesystem of vr2r1... That change was made to eliminate the 2GB disk space boundary with the previous version, and to simplify installation and expansion (ie the file system grows as needed).
>
> The Full Version is a fully loaded version with GNome and several other smaller window managers, and the full line of tools for GNome. The lite version is a full console version with everything from the full version excluding the X environment, therefore being able to be run on older machines.
Looking this up more brings me to umsdos project, a filesystem that apparently runs on top of another filesystem
https://tldp.org/HOWTO/UMSDOS-HOWTO.html and https://en.wikipedia.org/wiki/FAT_filesystem_and_Linux
This brings me to loadlin:
> loadlin is a Linux boot loader that runs under 16-bit real-mode DOS (including the MS-DOS mode of Windows 95, Windows 98 and Windows Me startup disk). It allows the Linux system to load and replace the running DOS without altering existing DOS system files.
https://en.wikipedia.org/wiki/Loadlin
And then there's also grub4dos
https://github.com/chenall/grub4dos