Just to make things clear:
Windows installs the boot loader on the MBR.
Linux installs the boot loader where ever you want:
1. MBR (Master Boot Record)
2 BR (Boot Record) First track of the Linux /boot partition (or /root if you didn't make a /boot partition)
3 Floppy disk.
So, if you have Windows installed on the first partition of your first hard disk and you want to install Linux, you should choose to install GRUB on the MBR or to a floppy. Installing GRUB on the MBR, GRUB will delete the Windows boot and installs the Linux GRUB boot. GRUB will detect that Windows is installed and will create an entry on the grub.conf file so you can boot Windows with GRUB.
You should not install GRUB on thte Boot Record (first track of the Linux partition) 'cause Linux is not installed on the first partition. The BIOS will not boot partitions that are not installed on the first track of a disk. That´s why, in this case, we must install GRUB on the MBR (or floppy). The BIOS will read the MBR of the first hard disk first.
If, for some reason, you have to delete Linux, you will not be able to boot Windows from GRUB, 'cause GRUB and Linux does not exist anymore. In this case you'll have to fix your MBR with the FDISK /MBR utility for Windows 9x or FIXMBR for Windows XP. It´s really simple.
Under WindowsXP you will have to boot from the WindowsXP CD, choose to start in console mode and type FIXMBR.
Use this command to repair the master boot record (MBR) of the boot partition.