1) The raid is degraded and you need to rebuild it, probably like this:
# mdadm /dev/md0 -a /dev/sdb1
Don't reboot until the raid has recovered.
Be sure to consult the mdadm manpage ($ man mdadm) for more details.
2) You need to specify a valid root before issuing a grub setup command.
grub> root (hd0,0)
grub> setup (h0)
Be sure to use the correct root location.
See the Grub Manual
section 3.2 Installing GRUB natively
for more details.