Well, what a difference a day makes. Having had some time to think about what I was doing I solved my installed problems.
Trick number one: when installing Red Hat use "fdisk" to set up partitions, this way no objections are made about things being above 1024th cylinder. Since I'll be using floppies at first, and then Windows 2000 boot manager it doesn't matter where the root partition is.
In Windows to format a large driver you have to choose the type of file system. Windows defaults to FAT, naturally, which doesn't work above 2 Gig. But rather than giving you a warning or picking a reasonable default Windows tries to do the stupid thing, fails and just says "it didn't work". "Professional" indeed!
Now that I have both OSes installed, I have to set up the boot manager, then install all the sofware I need and finally fight with the CD-writer (it seemed to have software problems with creation of multi-session CDs).