local area networking [limited or no connectivity]

local area networking

Hi to all! My problem: Two pc when LAN enabled -> "limited or no connectivity "

both pc1 and pc2 uses Win Xp pro, and can access internet on their own modem.

pc1 can not ping pc2
pc2 can ping pc1

pc1 & pc2 used to be on LAN (working), with pc1 on sp2 while pc2 has sp1,
and they can share internet with pc1 as the gateway(accessing internet on pc1 modem)
now pc2 is reformatted & has a new winXp pro sp2 also.

when utp (LAN)cable is not yet plugged on one or both pc:
and if pc1 LAN is enabled, it says "limited or no connectivity "
and if pc2 LAN is enabled, it says "cable unplugged "

on pc1: IP Routing is enabled
on pc2: IP Routing is disabled

both has WINS Proxy disabled.

pc1 has packets sent in greater(increasing) value quickly, packets received almost nil
while pc2 has packets sent in small value slowly, packets received also almost nil.
I already applied M$ patch to no avail. Same true with disabling firewall, set the nic to 10 Mbps/full duplex, set IP address manually 192.168.0.....etc
I have not yet reset TCP/IP stack because I believe its ok since both pc can connect to the net on their own modem.

my question is, which pc has defective LAN configuration?
what will i do to network them properly?

thanks in advance and for reading.

elmer