Fuse backed by a local filesystem is a different proposition to Fuse backed by a network service. There's nothing about running filesystem code through Fuse that makes it inherently more risky. However, accessing a filesystem over the network does make it unavoidably more likely it will be slow or unreachable, and not just in straightforward ways.
That's what I thought when I discovered how it worked. The "WUBI" install type is (was?) a supported install type in Ubuntu. But it's been working fine and I can't think any fundamental reason why it would be unsound.
I should say there have been non-fuse related hitches with the integration with Ubuntu (grub problems).
