[mrblink]

Are you trying to use "internet connection sharing"? If so, something's not working right. If not, then proceed below:

169.254.0.0 is not a valid IP address (it's a "network address"). You are trying to get IP addresses from DHCP, which you don't have. Go into the TCP/IP properties for each computer, and manually set the IP addresses.

Comp1: 192.168.1.10
Comp2: 192.168.1.11

Subnet mask: 255.255.255.0

Default gateway: try 192.168.1.1 (won't really do anything)
DNS server: same deal as default gateway

 

[mrblink]

I'm not trying to be a punk, but are you opposed to using a cheap wired router? It would be SO much easier.

Anyway, did you go through the internet connection sharing wizard on the NIC that the broadband connection is plugged into? It should have assigned an 192.168.x.x address to the second NIC, then turned on a DHCP server.

 

[mrblink]

Are you using a software firewall, like the Windows firewall? This can definitely cause issues. If so, only firewall the NIC pointing to the Internet, and disable it on the 2nd NIC. Make sure it's turned OFF on the other PC.

 

[mrblink]

You are positive that you have a crossover cable?

One side:
white/orange
orange
white/green
blue
white/blue
green
white/brown
brown

Other side:
white/green
green
white/orange
blue
white/blue
orange
white/brown
brown

Also, make sure all the copper is pushed to the end of the RJ-45 connector