Desktop ICS for iPhone

I have a desktop machine (PC1) running Windows 7 Home Premium 64bit.

It connects to wireless router downstairs via a Wireless USB Adapter for internet connection.

Also upstairs is a second desktop (PC2) with no wireless connectivity, so the internet is shared via Ethernet cable from PC1 to PC2 using a bridged connection.

Now, how do I also share the internet from PC1 to an iPhone device wirelessly?

I've tried adding a new Wireless connection from PC1 (Manage wireless networks -> Add) but no option to share internet comes up when the network is created. The iphone fails to connect (can see the network, just says unable to connect).

The ICS service is disabled and when setting to automatic and attempting to start it stops after a second with the message:
"The Internet Connection Sharing (ICS) service on the local computer started and then stopped. Some services stop automatically if they are not in use by other services or programs."

When right clicking my wireless adapter and clicking properties, there is no sharing tab.

I've done this, though while upstairs the connectivity is not so good... which is why I would like to connect through my PC as it is closer.