I have a dual boot too and this pre-upgrade was a GRUB foul-up.  You should NOT select "Update the boot loader configuration" at all.  Choose "Create new boot loader configuration" and all should work well.  It did for me after a few false starts. 

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My dual boot is Fedora/WinXP.  After first trying this Preupgrade, I thought all was lost in my Windows install -- it was not.  I did not need to do any Windows rescue.  My solution was to re-install Fedora 8 -- which easily recognized Windows -- and then repeat the Preupgrade.