MBR is in first cylinder/sector/whatever, but GRUB has two stages - first stage is in MBR, because it's small enough to fit there. Second stage is in the boot/ partition, because it's too big to fit in the MBR. First stage's purpose is to load the second stage. However, because of the BIOS if the boot/ partition is too far into the drive, stage 1 cannot find stage 2 and booting stops.
I'm not sure what happens when I install Linux first. However, there is a catch here - I already have an FAT32 partition as the first partition. It's a backup partition, and I want to keep it that way. Windows, however, will default to installing to this partition.