Normally the desktop should be the host. Usually this is a good idea because:
(a.) The desktop is more powerful, and the host has a greater CPU burden under DCC. This is by design.
(b.) The guest DCC software normally brings up a "view host" window showing resources on the host, and this is usually what a laptop is after (large hard drives, CD-ROM drives).
But be that as it may, it sounds like your basic problem is seeing the "remote" machine in one direction or another.
Try this:
On the machine where you're experiencing trouble, enter \\computername in either the Start|Run dialog or else enter it into the address bar of an open Windows Explorer window.
This should give you access to shared resources on the remote machine. Once this has been done successfully you should (from here on) see the shared resources in network neighborhood ("My Network Places" in XP).
Of course DCC is touchier than it should be, and it seems like a million things can go wrong with it (*sigh*).
Make sure you've met the basic networking requirements, such as using unique computernames, the same workgroup name, etc. A lot of XP users seems to let the workgroup default to MSHOME or whatever it is, while 9x users often default to WORKGROUP. Some network configuration change attempts can throw you back to these defaults too.