Setting up vpn network using loopback adapter

I set up a vpn on my machine with bot os as xp using the instruction
given at http://www.zdnetasia.com/techguide/n...9050037,00.htm.
I can see both computers and ping both ways, but when I try to connect
it just keeps asking for the password again and again. It has the
logon account darkened and set to guest and I've cleared the passwords
set everywhere. The guest account is turned off on both machines and
if I turn it on and try to connect it says the computer is not
accessible and may not have permission. Passwords have also been
cleared through computer management in admin tools still to no avail.
Strong passwords are disabled, but still tried to enter different ones
just to test and nothing.