Because LILO is <i>the</i> Linux Loader. You're free to use grub if you enjoy bloated sucky software; that's the beauty of free software. It doesn't mean the kernel contributors have to support you, though.
Note that earlier in the script, it tests whether you have scripts for installing the kernel, either in the user's directory or /sbin:<p><pre><code> # User may have a custom install script
if [ -x ~/bin/${INSTALLKERNEL} ]; then exec ~/bin/${INSTALLKERNEL} "$@"; fi
if [ -x /sbin/${INSTALLKERNEL} ]; then exec /sbin/${INSTALLKERNEL} "$@"; fi
</code></pre>
Trying the Lilo steps is a fallback strategy for users that don't have an installkernel script.<p>When you "exec" a command, control will not return to the script, because the process image is replaced with the specified program.