hmmm, that should work.
try adding the following to your lilo.conf:
after kernel starts loading you will see something like
"choose video mode <enter> to see a list or <space> to continue"
then at the next prompt type:
it will scan all available video modes and present you with a list of what (should) work.
don't be alarmed if your screen goes blank, it'll be back
NOTE: if nothing works, just reboot, hit spacebar at prompt to boot normal vga and change lilo.conf back to vga=normal then rerun lilo to save changes.
let us know, as this is a common question at LQ