I tried to do an upgrade on my system from hard drive. This required the supplemental disk. The installer does not seem to know about LS120 disks and only tried to mount fd0. As I have the LS120 (/dev/hdb on my machine) and no fd0 I could not install by this method.
The installer in 5.2 does not support loading supplemental diskettes from anything other than the fd0 device. Red Hat 6.0 has improved the installer process to only require one diskette for hard drive installs so it may do better in you situation.