I have Kubuntu on the usb drive. When running the install under disk setup it asks "install them side by side, choosing between them each startup" or "specify partitions manually (advanced)". I know I dont want to "erase and use the entire disk". It shows

Before:
/dev/sda1 5.6% (14.0 GB)
/dev/sda2 0.0% (106.9 MB)
/dev/sda3 52.4% (131.1 GB)
/dev/sda5 41.9% (104.9 GB)

After:
/dev/sda1 5.6% (14.0 GB)
/dev/sda2 0.0% (106.9 MB)
/dev/sda3 28.9% (72.1 GB)
Kubuntu 23.6% (59.0 GB)
/dev/sda 41.9% ( [The rest of this cuts off, maybe due to screen resolution]

I know that is not right, it would put Kubuntu into my windows partition. If I select specify manually, I don't understand how to select the sda5 partition for the install.

Ok I got Kubuntu installed & dual booting with windows7 on the new netbook -- success. Thank you everybody for your help & encouragement. This is how it went.

1) Using the windows7 partition tool, I deleted the new partition that I had made, sda4 & 5. Having shrunk the windows partition, I had about 97 GB free space on the drive. Up to now, this was a new netbook without anything being added other than the 1st time use info being done. There were no extra files to corrupt when I shrunk the partition.

2) I downloaded kubuntu-10.04-netbook-i386.iso to my desktop computer. Then I downloaded the Universal USB Installer from http://www.pendrivelinux.com/ into the same directory with the Kubuntu.

3) My USB memory stick had the U3 program built in so I got an uninstaller for that to clean the stick before using it.

4) I ran the Universal USB Installer to make the USB stick bootable & get the Kubuntu onto it. The installer did not recognize the kubuntu-10.04-netbook-i386.iso so I had to rename it kubuntu-10.04-desktop-i386.iso & then it loaded onto the USB stick.

5) Now I booted the netbook from the USB stick & ran the Kubuntu / Ubuntu installer. When I got to the disk space, I chose to use the drive's free space & it made the partitions needed for me. If I had never used the windows7 partition tool, the Kubuntu installer would have given the option to install side by side with windows. It would have let me choose the size of each installation. I learned some of this from the YouTube video at http://www.youtube.com/watch?v=XaqaDZZ_P0g, "Install Dual Boot Windows 7 & Ubuntu Linux 10.04 Lucid Lynx 64bit via USB Tutorial".

It all worked. Now all that is left is for me to learn how to use Linux / Kubuntu. I hope someone else can learn from my experience.