Step 1: Rewrite the differential equation in standard linear form.
Divide the equation by $\sqrt{1 - x^2}$:
$$\frac{dy}{dx} + \frac{2x}{1 - x^2} y = \frac{x}{\sqrt{1 - x^2}}$$
Here, $P(x) = \frac{2x}{1 - x^2}$ and $Q(x) = \frac{x}{\sqrt{1 - x^2}}$.
Step 2: Find the integrating factor (IF).
$$IF = e^{\int P(x) dx} = e^{\int \frac{2x}{1 - x^2} dx}$$
Let $u = 1 - x^2$, $du = -2x dx$.
$$\int \frac{2x}{1 - x^2} dx = -\int \frac{du}{u} = -\ln|u| = \ln|u^{-1}| = \ln\left|\frac{1}{1 - x^2}\right|$$
$$IF = e^{\ln\left(\frac{1}{1 - x^2}\right)} = \frac{1}{1 - x^2}$$
Step 3: Find the general solution.
$$y \cdot (IF) = \int Q(x) \cdot (IF) dx + C_1$$
$$y \cdot \frac{1}{1 - x^2} = \int \frac{x}{\sqrt{1 - x^2}} \cdot \frac{1}{1 - x^2} dx + C_1 = \int \frac{x}{(1 - x^2)^{3/2}} dx + C_1$$
Let $v = 1 - x^2$, $dv = -2x dx$.
$$\int \frac{x}{(1 - x^2)^{3/2}} dx = -\frac{1}{2} \int v^{-3/2} dv = -\frac{1}{2} \frac{v^{-1/2}}{-1/2} = v^{-1/2} = \frac{1}{\sqrt{1 - x^2}}$$
$$y \cdot \frac{1}{1 - x^2} = \frac{1}{\sqrt{1 - x^2}} + C_1$$
$$y = \sqrt{1 - x^2} + C_1 (1 - x^2)$$
Step 4: Apply the initial condition $y(0) = 1$.
$$1 = \sqrt{1 - 0^2} + C_1 (1 - 0^2) \implies 1 = 1 + C_1 \implies C_1 = 0$$
Step 5: Find the particular solution.
$$y(x) = \sqrt{1 - x^2}$$
Step 6: Evaluate $y\left(\frac{1}{2}\right)$.
$$y\left(\frac{1}{2}\right) = \sqrt{1 - \left(\frac{1}{2}\right)^2} = \sqrt{1 - \frac{1}{4}} = \sqrt{\frac{3}{4}} = \frac{\sqrt{3}}{2}$$
Thus, $y\left(\frac{1}{2}\right) = \boxed{\frac{\sqrt{3}}{2}}$.