that boot error is a lilo error so grub can not be in your mbr for the mbr the bios was sent to.
It may be in the mbr for other drive but not enough info at this stage
but consider this
bios to drive 1 mbr ntldr or grub then to its booting files or
bios to drive 2 mbr ntldr or grub then to its booting files
booting files are in /boot for grub.....you need to choice the bios boot order which then determines if you use my grub way of installing grub to hd0 or hd1
knoppix can see what /boot is on hdb1 etc if you put /boot there....and if it looks fine just install grub to mbr and point it to the correct folder
but of course check you will know how to set up windows stuff