Rewrite the given differential equation as:
\[ \frac{dy}{dx} = \frac{1 - x^3}{y - x^2 y}. \]Factor \( y \) in the denominator:
\[ \frac{dy}{dx} = \frac{1 - x^3}{y(1 - x^2)}. \]Separate variables:
\[ y(1 - x^2) dy = (1 - x^3) dx. \]Integrate both sides:
\[ \int y \, dy = \int \frac{1 - x^3}{1 - x^2} dx. \]The left-hand side integrates to:
\[ \int y \, dy = \frac{y^2}{2}. \]Simplify the right-hand side using partial fractions:
\[ \frac{1 - x^3}{1 - x^2} = 1 + x. \]Thus:
\[ \int (1 + x) dx = x + \frac{x^2}{2}. \]Equating both sides:
\[ \frac{y^2}{2} = x + \frac{x^2}{2} + C. \]Multiply through by 2:
\[ y^2 = x^2 + 2x + 2C. \]Using the initial condition \( y(0) = 1 \):
\[ 1^2 = 0 + 0 + 2C \implies C = \frac{1}{2}. \]Thus, the solution is:
\[ y^2 = x^2 + 2x + 1. \]