Both systems are Windows 7 Professional. Firewall is managed through Norton 360. I added mstsc.exe to programs allowed. I even went as far as to remove Norton 360 completely, shutting the computer down, and still no connection. as for remote desktop on my local network, not sure exactly of your question, if you could elaborate.
In the meantime, I have installed Team Viewer and I can connect in using this program but I am using the personal version as I don't want to pay for the business license as I feel this problem can be resolved. I also stated in the threads when I ping this IP address, I am getting replies.