Andrej,
I applied the Update2 (downloaded the 14 rpm files) and did the
rpm --upgrade then rebooted as per the instructions with no probs.
I have seen the LILO failure before with linux systems, it generally means
something has played with your bootsector or bootloader. I also had it
once when I installed using LBA HDD mode and changed to normal mode
accidentally.
Hope this helps.
Trevor