To me, it _feels_ like something is very off. I don't know what, but something important. I wonder if it's a bad download (ISO file), bad burn (cd), or corrupted install? Perhaps you installed overtop of an existing (different distro) installation without formatting?
lilo doesn't use a .menu.lst file - I think that's grub that uses that type of file. lilo uses a /etc/lilo.conf file, and lilo must be updated each time you make changes to that file.
Regardless, if it were me, I would decide that there are too many problems to continue and attempt to re-install from scratch, and hope for better success. IMHO

HTH