@sileshn:
This seems to be the problem with some exotic configurations with ulta/non-ultra DMA disks on a single cable. Before installing GRUB on setup screen, could you try to press ctrl-alt-f2, then login as root, and type
$ mount -o remount,rw /mnt/boot
then try to install grub, also try this if it still hangs
$ chroot /mnt && grub-install grub --no-floppy --root-directory=/boot /dev/sda # sda is where you want to install grub, in this case, the mbr of sda.
Another solution is to try not to create a separate /boot partition, and just using a / partition.
You don't need to go through the installation again, if you have installed the packages on your partition, just boot the installer, then press ctrl-alt-f2, login as root then mount your partition.
$ mkdir /myroot
$ mount /dev/sda3 /myroot
$ mount /dev/sda1 /myroot/boot #assuming that sda1 is your boot partition
# then bind the existing running partitions for the devices and kernel state.
$ mount -o bind /dev /myroot/dev
$ mount -o bind /proc /myroot/proc
$ mount -o bind /sys /myroot/sys
# chroot to your system
$ chroot /myroot
# then install grub
$ grub-install grub --no-floppy --root-directory=/boot /dev/sda