Note that earlier in the script, it tests whether you have scripts for installing the kernel, either in the user's directory or /sbin:

  # 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

Trying the Lilo steps is a fallback strategy for users that don't have an installkernel script.

When you "exec" a command, control will not return to the script, because the process image is replaced with the specified program.