Hi,
That shouldn't happen - are you using a disk with stuff on it already ? I'm not sure whether mkbootdisk effectively formats and copies at the same time (its not clear from the man page) - if not, it may fallover if you have existing files on the diskette.
The other possibiities could be that you are not using a HD diskette or have a lot of scsi type drivers that make the initrd too big to fit on a 1.44mb floppy. Have you tried running it with the 'verbose' option. For example :
mkbootdisk --device /dev/fd0 --verbose 2.4.17
(where 2.4.17 is the kernel version)
Hope this helps