I have used this method and had it work successfully many times (edit: with lilo most times but with grub too). Basically what you needed to do when you install the boot sector is to install it to /boot (/dev/hda3 it would seem in your install) and not the MBR.

I assume you are booting from a floppy into RH. If so, let's see your /etc/grub.conf. Reloading the bootloader is no chore at all.