Try changing LILO to read as I have added in bold. Then , once you get it to boot properly you can change the labels for each kernel if you want to.

Change this....

Code:
# Boot up Linux by default. 
# 
default=Linux 

image=/boot/vmlinuz 
label=LinuxNEW 
read-only 
# restricted 
# alias=1
To this:

default=Linux
image=/boot/vmlinuz
label=Linux
read-only

And change this:

Code:
image=/vmlinuz.old 
label=Linux 
initrd=/boot/initrd.gz 
read-only 
optional
To this:

image=/vmlinuz.old
label=LinuxOLD
initrd=/boot/initrd.gz