Have you run through the internet connection sharing wizard on both machines?
If I remember correctly the wizard is in your "network connections", go to file menu and select "network setup wizard". it should set up all the correct settings for you.
Other things to check are that you have the correct gateway set on the remote PC (it should point to the network IP of the comp with the connection) and also check that you have DNS server IPs listed on the remote PCs connection. It may be that you are connected to the internet but just have no DNS lookup available to the remote PC.
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