SuSE 7.2 needs or seem to need a dos partition to load lilo onto.
My method was...
Remove the swap partition, Create a small partition of 10M as DOS Create swap partition of the remainder. Boot via DOS floppy and format the C: drive loading system files (DOS) format c: /s Reboot
And Lilo fires up without the boot floppy disk. Kernel is loaded inc modules.
Also I entered this in the lilo.conf file install = /boot/boot.b and a bios = 0x80 setting too.
So what went wrong on installation ?
I've not been following the thread, but a friend of a friend had exactly the same problem and stumbled across the exact same solution you did. I never got to see the machine myself so assumed he'd just screwed up somewhere. Looks like I was wrong - there may very well be a brokenness in the 7.2 setup.