Mac
Have to question why you want to connect M2 to M1, why not put the extra nic in your freesco box or even connect the switch to the freesco box and the other 2 computers to the switch . that way you won't have to worry about xp and DHCP as freesco will do it for all.
All ways complicated if you have 2 machines capable of issuing DHCP on the same network.
As an observation the ip 176.16.0.3 seems a little strange I hope it is of your choice as it would have been reccomended to use 192.168.x.x or 10.10.x.x for your internal network and that is what I would have expected to have been issued by Freesco, but totally dependant on your settings and shouldn't effect your problem
Rickity