I do the same thing...almost. I use Win98, Win2k and Mandrake 8.1. I partitioned mine wint a 256MB swap space and split the rest of the drive in half, one half is / and the other half is /home.
As to LILO, I guess mine was too easy...I let it find my windows boot.ini and write it's own boot sector. Mine is set up to boot first to a screen where I can choose to boot into Linux, but the default is my windows boot (it stay there for 5 seconds), and then it goed to my boot.ini, where the default is win2k.
I hope this helps....
BTW I wrote a review for Mandrake
here
I promise, this is not designed to try and get anyone to go to that site (it's not mine), but I worked hard at the review, so I thought perhaps you might like to read it.

Mods, please feel free to delete that if you like.