There could be conflicting issue's with your 1TB hard drive and your 300 GB HD-
If your 1TB hard drive is external disconnect it and then proceed with installing Salix.
If it is part of the internal architecture inside of your computers tower than re-install Salix- -
You mentioned Lilo....do you not want to use GRUB 2?
That's the standard bootloader with most of the Linux Distributions.
Sorry I don't know all the details of Lilo- Is Lilo a bootloader as well?
And like Knightron suggest's manual partitioning is the best choice
When the partition manager prompts you 'create a new partition' for the ext3 journaling file system (/) 20GB for your distro/Salix. Than 'create another new partition' and allocate 1 to 2GB for the swap space.
Hope this helps.