"firewalls are off" but do you see the firewall icon (brick wall in front of the blue globe) on either or both computers? If so, you won't be able to direct connect. If either or both computers are firewalled, please give us your system details.
System details - help us to help you (click here)

Both computers also need to have chat enabled (tools > options > chat).

There's more info about direct connect here.
http://www.gnutellaforums.com/139263-post3.html