I am installing Red Hat 6.1 CDROM on a 2 drive system. (I have RH 5.2 on the first drive and just got a new 20Gb drive!) I booted off of the CDROM directly. I get through the questions about partitioning, I want it to leave HDA alone, so I chose the Manual Partition option and created a root and swap on hdb. When it gets to the part about nameservers, I switched to console 2 to mount my old partition and get the info off of it. I left it mounted) when it gets to the part about installing packages, I see an error message "/dev/hda" busy and python wants to break out into a debugger. Pretty minor thing, actually. I'm going to try again w/o mounting /dev/hda!
Try again without mounting /dev/hda. Depending on where you chose to install lilo, there is a pretty good chance that the installer would need to write stuff to the MBR of /dev/hda, so I am betting that is why you got the error message that you did. When performing an installation, no partitions on the system should be mounted other than those mounted by the installer.