Use the Windows Networking Wizard. But first turn off the firewall in both machines while setting up. Enable file sharing in relevant folders on both machines. Go into Control Panel, System and make an accurate written note of the Computer Names.
Windows Help is quite useful here but the actual process of Adding a New Network Place is tediously pedantic and often rather slow to respond.
Personally I prefer to set up a network initially by linking the machines by cable (crossover if direct between machines or straight thru if going via the router's sockets) rather than worry about the vagaries of wireless while setting up.