Well it has nothing to do with compatibility with the versions because if it was, you wouldn't even be able to get to the character generation screen.
Does either one of you have a firewall? That may cause some trouble. Also try lowering the security settings on windows. I had the problem that Windows would disconnect from Multi-player games because it violated the security settings.
Or the problem could be that either of you have a very unstable connection...
[ 08-21-2001: Message edited by: Meerlight ]