No connectivity

I am having a problem setting up a small home network of two PC’s for a friend. The first computer is connect to ADSL via a USB modem and this computer connects to the other computer via a crossover cable.

When the xover cable is plugged into both computers the light comes on the NIC and windows XP says it is connected in Network Connections. I have run network setup wizard on both computers, but am still getting no connection between them. (ie they can’t ping each other).

Also they have both been assigned a 169.254.x.x IP address and won’t renew with ipconfig /renew.

Both computers are running Windows XP (One Home and one Pro)