You shouldn't need to mess with any part of the toolchain to compile a 2.4.23 kernel!
All you should have to do is follow the instructions that whats-his-name posted; you shouldn't need to do anything else. I'm not entirely sure why it should fail to compile or install -- I'm puzzled over that.
To make LILO reinstall correctly onto your hard disk, you need to run lilo like this:
chroot /mnt/sysimage /sbin/lilo
Once you've done that, reboot the system and try to compile & patch again.
If you're still hopelessly lost, go to this website: