Today I tried again. This time with the Plop boot manager doing the hard work of booting USB. This made all the difference, and now I'm waiting for the Ubuntu installation to complete. Here's what I did:
First, since I needed to modify system files in WeTab, I needed to get root access. It was pleasantly simple: just launch WeTab Market and install the RootShell package. This creates a launcher on the WeTab desktop; clicking on the launcher opens good old terminal (at this point life becomes a lot easier if you plug in a USB keyboard). In the terminal you can use the familiar "sudo" tool to execute commands as root.
Second, I needed to add Plop to the WeTab boot menu. For this, I first downloaded the bootmanager from here, choosing the file plpbt-5.0.12.zip. From the package I extracted the file "plpt.bin" and copied it to /boot/extlinux directory. Next, I added a boot entry to the /boot/extlinux/extlinux.conf file. The entry contains these lines:
menu label ^plpbt
After that, insert Ubuntu USB stick, reboot keeping the quicktouch button down, and there was the extlinux menu. From there, I selected "plp" and got another menu, the Plop one. It showed the option to boot from USB, which I did.
Ubuntu booted, and recognized the touch screen, although as a single-touch device only. Also WiFi was recognized right away. I chose "test ubuntu without installing" and played around for a while. Then I launched Gparted and shrank the big ext3 partition on the device. My WeTab has 32 GB flash, so I gather I can use 16 GB for Ubuntu. Even that leaves 12+ GB for WeTab, and I reckon it should be plenty.
Now, after making space for Ubuntu, I finally launched the Ubuntu installer, answered to couple of questions and started waiting. Let's see what happens.