You must note that the linux filesystem does not work the same as the Windows filesystem. In linux you don't have different partitions accessible by letters ( C:, D: etc) and each partition with the files in a tree like in Windows. In linux you have the same tree-like filesystem, but you have only one root, denoted by "/". You can add another filesystem in this tree at any point you want, including at root ("/"), operations which is called mounting. Let me give you an example: if you want to see what files you have on a CD-ROM you have to create first a directory someplace, for example "/mnt/cdrom". Then you mount the cd-rom filesystem to this point in the linux filesystem tree and if you enter in the directory "/mnt/cdrom" you will see the content of the cd-rom. When you want to eject the cd-rom, you must first unmount the cd-rom filesystem.
Now, to your problem:
1. I recommend you to partition your disk first with fdisk and create your partitions for windows first and let the space you need for linux unpartitioned. For RedHat 7.3 I believe 2GB is more than enough, you may need more depending on what other applications you want to install.
2. Install Windows first, because if you install linux first windows will override your bootloader and as a linux beginner you don't want to reinstall the bootloader yet (altough it's not that hard).
3. Install linux. Linux will automatically detect the unpartitioned space. You need to create only 2 partitions: one ext2 or ext3 (better - but I dont remember if RH 7.3 supports ext3) and one swap. The size of swap is theoretically double your RAM size, but if you have more than 256 MB of RAM then 256 MB of swap will be enough.
4. Now, when linux asks what is the mounting point, it really asks where to put each created partition in the filesystem tree (except for swap). So what you want to do is to mount the ext2 partition you just created at "/" (root), since that will be the start of your linux filesystem.
Normally what each directory holds in any linux filesystem:
/boot - the boot loader
/bin and /sbin- core system programs
/usr/bin - some more system and user programs
/home - directories for each user account
/var - directory for logs and temporary stuff
/tmp - also temporary stuff
On a server installation, for ease of administration and security reasons you will normally find /, /boot, /var, /home assigned to different partitions, but for home use you need only one big / partition and a swap partition
5. If it helped, please click Helped
PS: Use Grub. It's better than Lilo, altough for you it won't make much difference...