Well there you go - I have, for the first time, just encountered the issue that mgh has. And I think the work around is simple. Launch the installer. When given only the choice of "erase entire disc", or "custom", click on "custom". Then click on the Windows partition. You then have the option of resizing it. Back in the days of PC2007 it was recommended that you choose a size in multiples of 1024mbs. Probably still not bad advice. Write to disk. You can then go on making Linux partitions, or if you prefer the automatic approach, quit out of the installer and relaunch it. You should then see the "use free space" option and leave the installer to do its thing.
Just remember to defrag Windows before any of this. This goes for any dual-boot with Windows, unless it is a fresh install. Windows treats its hard-drive like a teenager treats its bedroom - just chucks crap everywhere! You need to round everything up neatly. You can also do the partition process with GParted, but you need to know what you're doing. But then, OB Bonsai doesn't have GParted or ntfsprgs, as I found out!