Ok - I use it with LILO 22.2 here, it's on Debian, and it's the only box
where I ever needed that option.
My lilo.conf:
----------8<--------
lba32
boot=/dev/md0
raid-extra-boot=/dev/sda,/dev/sdb
root=/dev/md1
disk=/dev/sda
 bios=0x80
disk=/dev/sdb
 bios=0x81
install=/boot/boot-menu.b
delay=20
default=Linux
image=/boot/vmlinuz
  label=Linux
  read-only
----------8<--------
The following is from a standard RedHat 7.3 system with LILO 21.4.4-14:
----------8<-----8<-----
boot=/dev/md3
map=/boot/map
install=/boot/boot.b
message=/boot/message
prompt
timeout=40
linear
default=2.4.18
image=/boot/vmlinuz-2.4.18
  label=2.4.18
  read-only
  root=/dev/md2
----------8<-----8<-----
Both systems are SCSI-only though.
The following is an IDE-only RedHat 7.2 with LILO 21.4.4.14
----8<-----8<------------
boot=/dev/md0
map=/boot/map
install=/boot/boot.b
prompt
timeout=50
message=/boot/message
linear
default=linux
image=/boot/vmlinuz
  label=linux
  read-only
  root=/dev/md1
----8<-----8<------------
Perhaps you could change the lba32 option into linear ?  I'm really
shooting in the mist here - LILO tends to "just work", and ignorance is
bliss   ;)
-- 
................................................................
:   jakob@unthought.net   : And I see the elder races,         :
:.........................: putrid forms of man                :
:   Jakob Østergaard      : See him rise and claim the earth,  :
:        OZ9ABN           : his downfall is at hand.           :
:.........................:............{Konkhra}...............:
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