Launching Ultimata I goes to full screen mode and I don't seem to be able to switch virtual desktops. Is there a way to launch Ultimata I in windowed mode?

Press the Option and Return keys at the same time will reduce it to a small window. Unfortunately, that window isn't sizeable though. In order to get a sizeable window you'd have to download a different version of DOSBox or Boxer or whatever you prefer and run the game in that.