The file /etc/lilo.conf is what you edit, then the program /sbin/lilo is what you run to put the changes into the boot record. But /sbin should be in your path (where Linux looks for programs), so you can get away with just typing # lilo when you're done editing.

The error you're getting is due to /etc/lilo.conf not having permission set for anybody, including root, to run it as an executable even though it can be read by everyone and written to by root.

Try $ ls -l /etc/lilo.conf and you should see something like:
  • -rw-r--r-- 1 root root 5994 Apr 18 02:55 /etc/lilo.conf
After the first dash, the possible permissions are read write execute for file owner, rwx for the owner's group, then rwx for everybody else - but nobody has execute permission 'cause it's just a configuration file.

-- Ed