When you ran /sbin/lilo after booting from your rescue disk, were you
'chroot'ed to the root file system and was /etc/lilo.conf on your hard
disk visible (mounted)? Also, do you have more than one disk drive?
I've had similar problems with both GRUB and LILO if I'm not very
careful to be 'chroot'ed to the boot disk root filesystem. Also, I
have one system I support that has a hard disk plus a JAZ drive that
is always on and mounted. The wierd part is that when booting from a
rescue disk, the JAZ drive is sensed first as /dev/sda, and the hard
disk as /dev/sdb. For some odd reason, LILO doesn't handle a boot
sector on /dev/sdb correctly. I have to boot with the JAZ drive
offline, tell LILO to write the boot sector to /dev/sda, but load the
kernel and boot image from /dev/sdb1.
Reality is for people who lack imagination.