Plug-in Linux Disk as Primary Master and Windows disk as Slave. install GRUB in the MBR of Linux Disk and add an entry of Windows in menu.lst file. both disks will be bootable separately.
2) Where should I install GRUB, so that it will dual boot both operating systems, and ALSO so that should I remove the linux drive, Windows would still be capable of booting itself?
you can do that but you can't rely on Floppies all the time. Floppies dont last for Long time. try
3) Would it make sense to install GRUB onto a floppy? Then when I need to use GRUB to boot either system I can boot from the floppy.. otherwise, Windows will boot as normal.. would this work? Am I misunderstanding something?