The loopback is not only suitable for installing on a windows FS.
I use it to put an ext3 image on a vfat sd card in my Wii, since
homebrew apps are only able to handle vfat. So I'm not forced to change
the sdcard or partition it.
http://gitorious.org/dockstar/emdebian-multistrap/blobs/master/patches/initramfs-tools_loopbackrootfs.patch
I could image other cases:
Embedded world: create RO images, mount them for fallback, different
versions of a firmware (behaviour charaterized by the rootfs)
Servers: mount several versions of an installation, test new
installations without reorganizing the hosting FS
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