hmm...
sounds similar to a problem I had networking two machines running Windows ME.
Have you enabled internet connection sharing on the machine which has the connection?
The only solution I found when I had problems was to remove all network devices in the control panel, shut down the machine, physically remove them, then power up so it knows they are not there. Then powered back down and reinstalled the network card and net connection and ran the home networking wizard which finally sorted the mess.
Dunno if other Win versions have this wizard or not.
Am pretty confident that there was an easier solution, but there are so many damn places in windows to modify network settings that I figured deleting the whole lot and allowing it to automatically set things up was the easiest way.
Hope this helps, probably not now I read it but gotta go work so can't type at length!