Windows 7: Problems accessing network printer error 0x00000002

This error keeps reappearing every few weeks and my wife is loosing her rag with me so really appreciate some help!

My set up is 2 windows 7 Pro pcs on a LAN. My Canon printer is attached by USB to my PC (PC1). It is shared on the home network. I have created a homegroup and my wife's PC (PC2) has joined the homegroup. I have added the printer to her printers and all is fine for a while.

At some point, and I'm not sure what causes it, could be me rebooting after windows updates, she can no longer print and it says the printer is offline. On my pc no problems printers is working fine.

In order to fix this I have tried the following:

Remove printer on PC2
Add printer back on PC2. Errror 0x00000002 which i believe means it can't find it.
Remove printer from PC1 and add back. No problem
Add printer PC2. Same error
Uninstall printer on PC1 via device manger and remove from PC1. disconnect printer USB cable.
Reconnect printer USB to PC1, drivers install etc, add printer to PC1. works fine.
Add printer to PC2. Same error
Leave homegroup on PC2. rejoin homegroup and add printer. Same error

Now I have obviously fixed this in the past but didnt take notes. I think I uninstalled everything and rebooted both pcs and then started from scratch. This is clearly not a sustainable solution!!!

What I am incredulous about is I thought the whole idea of homegroup is to make home network sharing like this simple and get over all the security issues in Vista.

Thanks in advance

Mike