Strange it may sound but the problem was something to do with the hard disk. I replaced the original Seagate Barracuda (110GB) disk with another 40GB disk and then there was no problem with the grub install.
I did give it another try with the original disk and left the grub installation running for over 20 minutes but nothing happened. Checked the status using sys monitor and found that the Drake Install was in sleep state. Tried to nudge it with stop and resume without any success. By the way the original disk does not appear to be faulty and I was able to set partitions using Gparted without any difficulty.
I had a Maxtor drive like that. You could partition it and format it and store any amount of data on it reliably, but you couldn't install an operating system on it. It wouldn't accept the boot code in the MBR. I messed with it for about a week, then called Maxtor. I started to explain this oddity, and was cut off by the tech finishing the explanation. They got some bad parts from a sub contractor, who was paying for a recall. I gave my name and address, and a new drive was delivered about 8:30 the next morning, about 16 hours after the phone call. I was both shocked, and amazed, but well pleased by the speed with which the whole affair was handled.