It would really help true Linux newbies if you somehow made this work out of the box. For example, I selected the Gentoo download. But I had to download WinPcap, too. Unzip the Gentoo image, put the image in the right place, edit the XML file and be able to understand the error when it didn't boot first time. True Linux newbies would have no hope - most will open the XML file, take one look and think "WTF!". This could all be automated (ie, the user selects Gentoo so have the setup program edit the XML file accordingly).
Trying to help you win hearts and minds here.
But, hey, I have it up'n'running -- back to the readme.txt file -- are you really gonna make me set up the swap myself? C'mon....
CoLinux is a great idea, please keep up the good work.
you should have a look at the colinux installer for linux live-cd installations, Colonist:
Colonist is a very easy way to install linux with colinux on windows.