I've never used grub and am still relatively new to Linux myself, so take this with a grain of salt. But here's something I know (from reading in a manual) about LILO. (LILO is a Linux boot manager like GRUB if you don't know.) I assume that by principle it is applicable to any Linux boot manager. This comes from the SuSE 8.0 manual (translated from German):
LILO consists of:
* a LILO boot sector with first level of LILO code, that starts the actual LILO on boot
* the LILO machine code
* a map file, in which LILO writes where the Linux kernel is found and other data that it needs
* optionally, a message file for the boot screen choices
* the various Linux kernels and boot sectors, that LILO should offer to start
Now comes the important part:
(also through file moving) to one of these parts makes the map file invalid, and therefore a new installation of LILO
is necessary. This applies above all to any change to a new Linux kernel.
Since you have updated the kernel, the information that GRUB has about your current Linux kernel is no longer valid. That is why the problem: GRUB still knows how to boot Windows, but when it tries to start Linux, it is pointing with now-obsolete information to a non-existent Linux kernel.
As with LILO, part of the solultion is probably to make a new GRUB installation. Since you can't really now boot into SuSE to make a new GRUB installation, in order to avoid reinstalling your entire SuSE installation (this would probably make you lose all of your data unless it is backed up somewhere) you will have to find some trick to reinstall GRUB without booting using GRUB. There is almost certainly some way to do this, I just don't know it.
HOWEVER, the error message that you are actually getting is related to the 1024 cylinder problem. Yes, a standard way to get around this is to place a small boot partition in the first 1024 cylinders of the hard drive on a primary partition, so that any boot manager can find it. This is usually limited by the BIOS though, so I'm a bit surprised that it worked before but doesn't now.
Have you tried booting with your rescue disk (bootable floppy)?
Funny that as a Linux "newbie" you are using GRUB with SuSE, since SuSE likes to use LILO by default.
Btw, SuSE has a rescue system of its own. You could maybe read up on that.