I installed RH7 on a second primary partition (1GB due to bug #18387) with Win2K installed on the first primary partition (6.5GB). The lilo setup did not recognize the pre-existing Win2K partition and only gave me the linux option. There is no option to add or delete other bootable partitions to lilo during setup.
I'm having exactly the same problem - Not only that , I can't use the HOW TO instructions to get the WIN2K bootloader to boot into the 2nd partition (Linux) /dev/hda2.
I have the same problem with Win98 under RHL 7.1 Lilo doesn't list the win98 partition as a boot option. When doing a "workstation" install unto a linux partition, the MBR is overwritten to use lilo and you can't boot windows until you update /etc/lilo.conf.
Newer releases of Red Hat Linux properly detect NTFS partitions during the install and allow you to configure them for booting