Ubuntu 7.10 Gutsy Gibbon Desktop (Live) CD does not run on 128 MB RAM machine but it has a boot option "only-ubiquity" for installation on Low RAM machines. I decided to install Ubuntu on 128 MB RAM desktop PC using this option.
Booting Ubuntu Live CD on low RAM machine also requires SWAP partition, therefore, I booted with Puppy Linux Live CD and created 512 MB Linux SWAP partition using Gparted. (The same could be done with Gparted Live CD or any other Linux Live CD which can boot on 128 MB RAM and has Gparted).
Then I inserted Ubuntu 7.10 Live CD and pressed "Esc" key to get the "boot:" prompt. I used the following command:
boot: live only-ubiquity
After waiting for a few minutes the first screen of Ubiquity installer was in front of me on default Ubuntu background. I did the selections on each step and chose the "Manual" partitioning method. I selected the / partition and proceeded to install.
Ubiquity took 3 hours but I could successfully install Ubuntu 7.10 Gutsy Gibbon on the machine.