Okay, I seem to have identified and fixed the problem, though I still do not know what was going wrong. Can somebody explain what was happening, and let me know if there is a better solution.
Basically, When I changed BIOS Setting "IDE to DMA Transfer Access" to Enabled, GRUB loaded properly and I could boot into WinXP or FC3 as normal.
However, on rebooting, the "IDE to DMA Transfer Access" BIOS setting would get reset to "Disabled" on its own, and I would run into "Grub Loading Stage2Read Error" once again. After a lot of trial and error I figured that if I Enable the on-board Ethernet (the one that doesn't work anymore), then "IDE to DMA Transfer Access" BIOS setting would stay "Enabled" instead of getting automatically reset to "Disabled" at reboot.
This doesnt seem to have anything to do with WinXp or FC3 Operating System, because the setting gets disabled even if I reboot at GRUB stage itself.
So now my comp is running fine with "IDE to DMA Transfer Access" and On-board Ethernet both set as "Enabled". If either gets disabled, I would once again start facing "GRUB Loading Stage2Read Error" messages!!
Can anyone help me understand what seems to be happening?