You might need to turn on LBA support in your BIOS setup, or use --force-lba while installing GRUB, so that GRUB can see the whole disk. Another option is to install the OS into the partition that is physically first on the disk. I'd guess that if the installer is smart enough, it will respect the 1024 cylinder limit while placing the /boot directory.
Stage 1.5 doesn't load the kernel, it is used to interpret filesystems (and to load Stage 2). There are different Stage 1.5 images for different filesystems. If the Stage 2 image is somewhere not reachable by Stage 1 because of BIOS limitations, using Stage 1.5 won't help.
Sometimes different kinds of hardware combinations and setups prove too difficult for OS installers to handle. I have a vintage system with a 120 gig disk that the BIOS doesn't understand. Currently I boot from a smaller disk. When the kernel is loaded, the big disk works perfectly. Windows couldn't access the whole disk without a DDO (Dynamic Disk [or Drive] Overlay) - what a surprise.