> Note that Cooperative Linux still has no dependency on Cygwin and that the system being installed to may or may not have Cygwin before and after the install.
Not quite true.  There is a restriction with cygwin that only one cygwin.dll may be loaded in memory at any given time.  If the dll shipped with coLinux is different than the one for the cygwin system installed, either coLinux will fail to work, or some of the cygwin utilities.  Since it is most likely the incompatabilities would be with library calls coLinux does not use, it is most likely users will only see problems if they start coLinux first and then try running cygwin utilities...
The best way around this problem is if coLinux was available as a cygwin package for those who already have cygwin.  Those who already have cygwin could use that package.  Those who don't have coLinux would use a windows installer which installs the cygwin.dll.
BTW.  When distributing a copy of cygwin.dll it is best to include information about what build was used, so people can obtain the correct source later, should it be required.