Here is an update:

Tools... Options... Bug Reports... View Example...
We now both have this result:
Received incoming this session: true

We can search each other by IP address, and see the list of files to share...
He was able to download only ONE small .mid file from me, AOK!

I still could not download anything from him, results:
Queued... then Connecting... then Awaiting sources...

Just a minute after the first successful DL, he tried to DL a larger file from me, then he also got that result:
Awaiting sources...

And yet, we both checked and could still see:
Received incoming this session: true

WTF??? What next???

We are going to stay connected for a few hours and try again...