Straight through CAT5 cable
Crossover CAT5 cable
Basically if you have two PCs connected together with no hub you need to enable
output from A to go to the input on B
input from A to recieve output from B
Hence the term cross over as a hub would do this automatically so here you would use a standard through cable.
If you look carefully at the crimped ends of the cables next to each other you should be able to disern which type it is[provided its a clear end cap].
You seem half way there if they can see each other so you need to ensure they are on the same network group name but both with different computer names and that you have enabled sharing on at least one folder on each PC.
Ensure you have turned of XPs firewall if your attempting to use it as it does not work correctly on intranets like yours.
If your using Zonealarm you need the pro version for ICS as the free version doesnt support it.If you have the pro version then it should detect the new network and ask for permission to connect to it.