You are correct. However this is handy at times. For example on my
original eeePC the Xandros installation took over the place on the MBR where
grub would normally be located. If you wrote grub to the MBR it would make and
entry for Xandros and whatever other distro you were installing, but upon
removing the said distro you could not run Xandros as the bootloader would be
overwritten. Or if I restored Xandros from the restore CD it would trash
grub.This is similar to what would happen with Windows.

The solution was to install grub not to the MBR but to the device on which it is
installed. If you have a boot manager you can switch the boot order without
changing the BIOS. My HP desktop or eeePC uses ESC at the first screen. When
this opens then I can boot any drive attached to my computer, including usb
drives and keys, which is very handy.

The trick is that grub for those devices has to recognize the drive as hda(0,0)
and grub must be written to the device and not another drive. If you have this
capability you can keep your main OS untouched and use as many external devices
as you want. Some people have swappable hard drives that they can access from
the front for example. You can even partition the device if it has large
capacity. You may have to manually edit grub on that device to change whatever
it says to hda(0,0).

In Ubuntu you can decide where to write grub to on page 7 of the installation
where it reviews the installation choices by clicking on the Advanced button on
the bottom right. Most people miss that.

No, in fact it is good practice. There are utilities for that, but I find
it just as easy to edit menu.lst. However, some of the utilities actually remove
the old kernel files, so if disk space is an issue I would go that route. I tend
to use Synaptic to remove old kernels, just because I have got into that habit.
I usually keep the old kernel around for a bit to make sure that everything
works before turfing it because kernel updates can mess you up.

Whenever you update the kernel and something does not work then re-boot and try
to the older kernel and in most cases things will stil work as you expect. After
awhile the packages will catch up with the kernel and you can try the newer
kernel.

The Windows bootloader and grub occupy the same space, so only one can be
there at a time. Grub can be written elsewhere, but Windows needs its bootloader
on the MBR of the boot drive. If you remove grub you need to restore the Windows
bootloader using the Windows installation CD. No way around this to my
knowledge, but I do not mess with Windows anymore and my info may not be up to
date.