You might also want to consider a home network.
A 10mbps thin ethernet kit takes about 30 mins to install and costs at most £60 - I got mine from PCWorld which is hardly the cheapest place to get kit, so I'm sure you could find one cheaper elsewhere.
It is significantly faster than all the other options listed above, but does need a free card slot in both pcs. They usually come with two network cards, two 5m cables and a hub. (External CDRs and HDs are much slower than their internal counterparts !).
Intel are now marketing a wireless home network, which uses IR and is just as fast. I don't know the price of the units, which connect to a USB port, but I suspect they are a bit more expensive than the traditional cable option.
You also get the benefit of being able to share printers, internet connections, network drives (a drive which appears to be local to both machines) and other useful features.
If you have 98 or ME on both machines, it is a piece of cake to install. If you are using 95 it is a bit trickier.