Actually, this "bug" is really by design of the frugal install feature; it can't repartition the partition that it's mounted on (to do that the system need to be run entirely from ram, which the Ubuntu Live CD is too large for). The workaround is to do the repartitioning beforehand from Parted Magic or Slitaz before attempting to install Ubuntu. Alternatively, just use the Netinstall option for Ubuntu instead of the Live CD, that doesn't suffer from the same issue.
Actually, this "bug" is really by design of the frugal install feature; it can't repartition the partition that it's mounted on (to do that the system need to be run entirely from ram, which the Ubuntu Live CD is too large for). The workaround is to do the repartitioning beforehand from Parted Magic or Slitaz before attempting to install Ubuntu. Alternatively, just use the Netinstall option for Ubuntu instead of the Live CD, that doesn't suffer from the same issue.