You need to have two partitions. You cannot install Windows and any other OS in the same partition. Personally, I would run Ubuntu as a virtual machine using VMWare Player in Windows rather than by itself in a partition. Partitioning always wastes some
space and you don't need to do that.
Pick the recommended disk size for Ubuntu. If you use a "dynamically expanding disk" vhd the virtual machine will only use what is actually needed. Only if you select a "fixed disk" vhd will you actually use the space selected. If you select 80GB
dynamic but only need 5GB the vhd will only use 5GB of the host's file space. However, if you select 80GB
fixed but only need 5GB the vhd will still use 80GB of the host's file space.