The easiest way I install Linux and Windows on a single drive is this way.
First I install Windows on a usually a 1 gig partition, where the system and OS reside on for Windows. Then I create another partition for Linux, I would say you could create it from 150 megs to a gig... This is where I put the /boot and Swap. Then the rest is however you want to create it, Linux and Windows partitions on the rest of the drive, if you have a second hard drive, you can either split that up, or have Windows on it, or Linux. And yes, unless you want to use a floppy to boot up Linux with, you would install LILO to the MBR.
You can go that route, or you can use the first hard drive for Windows, the second for Linux and boot with a floppy into Linux which some find just as easy to do for a dual boot.