Problem connecting 2 PCs using an Ethernet cable

I'm having problems connecting two computers together using an Ethernet cable.
I'm nearly sure i have no hardware problems because the two computers can communicate with the internet with no problem.

One of the two computers is a PC using WindowsXP Pro
The other is another PC using WindowsVistaHome.

I know there are ways of connecting them wirelesssly, but for my desired job I need to be able to have these 2 PCs in the same network using an Ethernet cable.

They are both in a workgroup called "WORKGROUP"

The PC with WinXP is not able to detect the PC with Vista

But on the PC with Vista , under "Network" the name of the PC with WinXP shows up under "Unspecified" but when i double-click on it to see the shared files/folder it give me an error :

When I click on diagnose, I get another error :

Thank you

Thank you very much for the reply Kemical !
I followed that guide step-by-step and I keep on getting the same error
i even bought a crossover ethernet cable to try and see if it makes a difference but i still get the same error!

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