And the hardware gods of old said ...
For some reason, some old fogies said "Thou BIOS shalt not boot above the 1023rd cylinder of a hard drive."
Apparently the BIOS geniuses figured that n one would ever need to boot a partition above that mark. On many hard drives, the 1023rd cylinder lies roughly 8GB into the drive. So, *bootable* partitions typically need to lie within the first 8GB. Why this archaic implementation still exists is beyond me.
Anyway, I'd be willing to bet this limit is the source of your frustrations. If that 8MB was the first partition of your drive, it would probably work.
-SUO, battling my own LILO gremlins at the moment