Hi again Michael,
I gave this exact setting up and I'm trying to go work-around-way, having a new partition layout on the /dev/sdc flashdisk:
/dev/sdc1 as "/" - ext4
/dev/sdc2 as "swap" - swap
/dev/sdc3 as "Windows drive" - FAT
Note, that I started with keeping/shrinking windows partiotion at /dev/sdc1, than found out BIOS requires to have /boot somewhere within first 4GB of the disk I shifted a small /boot device to /dev/sdc1, keeping root "/" at /dev/sdc6 and swap at /dev/sdc5. I guess this is what could cause the confusion to the system, so I got rid of that.
I guess a problem can be in /etc/grub.conf where there was something like:
I've googled for 2 hours but haven't found anything explainig the two drive adreses at the end, I'm just assuming one can point to /boot and one to "/" partitions, being same most of the time (if no /boot is used).
grub setup --stage2=/boot/grub/stage2 --lba-enable (hd1,0) (hd1,0)
I'll let you know when installation finishes whether this solution helped or the problem persists.