Hi,
I have two machines connected into LAN directly via crossover cable. One of them is running CentOS 4.2, the other is Windows XP Home Edition. They are set up for simple file sharing. Their IP addresses are manually assigned:

-Windows XP IP: 169.254.0.0 and subnet 255.0.0.0 with default gateway and DNS server address fields left empty;

-CentOS IP: 169.254.0.1 and the same subnet as WinXP.

At CentOS, samba is installed but smb.conf has not been touched.
When I ping the local loopback at both machines, it works. Pinging their own IP addresses also works, but when I ping WinXP from CentOS (by the IP address), it shows no output unless I press Ctrl-C (and then follows statistics about packets sent, zero received and 100% packet loss).
What is to be done to make XP visible from CentOS?

Can you ping the CentOS machine from WinXP? Is the firewall on in the WinXP machine?

Yes, WinXP pings CentOS succesfully, returning network statistics that show number of packets sent, number of packets received, lost = 0 packets, etc...
Firewall is on on the WinXP machine...

Sorry but 169.254.0.0 is not a good idea for an IP Address...
1st of all change the IP's.
Let say Class C-Network so WinXP 192.168.1.1 and the centOS to 192.168.1.2
and the Netmask (Subnet) 255.255.255.0.
Then your ping will work if the no firewall is still blocking, and if its a real cross over cable. But if one of the systems has got a gigabit NIC you won't even need a crosscable cause crossing is one of the standard implementation of the gigabit standard. And if you want to share files you need Samba configured on your CentOS machine and in the XP Firewall the File and Printer Sharing enabled.

Changed IP addresses and subnet as recommended. Even with the firewall off, I get the same 100% packet loss... no ping from CentOS to WinXP...

ok what happens if you ping from WinXP to CentOS?
and are you really sure that the Device is up in CentOS?
check with #system-config-network.
then check #system-config-security if the eth0 or whatever is listed as truthed interface?

#system-config-network shows eth0 device as active, IP address as given previously and subnet as given.
#system-config-security I get response that command is not found...

Fantastic things happening:
After changing network card on WinXP machine for a new one, WinXP cannot ping CentOS anymore- destination host unreachable.
Both machines ping themselves but cannot ping each other... wires, right? But how the heck could WinXP ping CentOS before?!

Okay so you changed physical the NIC of the XP Computer. So there will be of course no static configuration anymore.
What are the manufactors of the NICs? And what is their vendor name?
How long is the cable your are using?
Did you ever thought about in spending some money in a cheap hub or switch and a simple patch cable. Total coast will be something around 15 bucks (less expensive to very expensive...)
Do you have any applications like VMWARE installed on any of your systems? ThirdParty Firewall Software like McAfee, Norton ?!

After changing IP address of the XP box, ping started working again, but only Xp-to-CentOS. And since you mentioned McAfee firewall, that reminded me that I actually have an express edition of a third-party firewall (McAfee) that came bundled with AOL software. The first time the firewall was mentioned I aimed straight to Windows firewall...
Opening Properties of this express edition, and lookie here: ICMP's were blocked and there was a log about bunch of denials to the IP address of the CentOS machine...
Now both machines ping each other without problem... sorry if I caused any inconvinience... would cold six-pack of beer suffice as an apology, odcheck?
P.S: Network cards are Lynksis and D-Link and cable is 3 meters long...

No sweat ;-)
I works and thats the deal :-)
Regarding the cable stuff it could have been a possibility that the collisions are to high happens often in newer systems with 10/100/1000 nics.

You're welcome