Ive done that what you posted, grub loader now shows without the fancy graphics(the pcolos image).
There are entries but none of them work like they should. This is the menu.lst in the Linux hdd:
timeout 10
color black/cyan yellow/cyan
gfxmenu (hd1,0)/boot/gfxmenu
default 0
title linux
kernel (hd1,0)/boot/vmlinuz BOOT_IMAGE=linux root=UUID=10efa168-2ab9-42d5-9fef-$
initrd (hd1,0)/boot/initrd.img
title linux-nonfb
kernel (hd1,0)/boot/vmlinuz BOOT_IMAGE=linux-nonfb root=UUID=10efa168-2ab9-42d5$
initrd (hd1,0)/boot/initrd.img
title failsafe
kernel (hd1,0)/boot/vmlinuz BOOT_IMAGE=failsafe root=UUID=10efa168-2ab9-42d5-9f$
initrd (hd1,0)/boot/initrd.img
title windows
root (hd0,0)
makeactive
chainloader +1
hd0 is windows, and hd1 is linux