If you want to do a direct connection to your friends computer to share files. Both yours and your friends Firewall must be turn off. And both of you must know each others IP Address. Then enter your friend's IP Address in the Direct Connection box. And have fun sharing.

To find out what your IP Address is visit this site:
http://www.whatismyipaddress.com/

No, it's not necessary. First of all, either you use a firewall or you don't. You don't turn a firewall of just to make this or that work. Just configure it correctly or don't use it in the first place. Further, LimeWire should really not require *any* of the peers to accept incoming TCP connections. It supports connection over UDP which usually does not require a re-configuration of the firewall. In any case, with any kind of sane Gnutella client it is absolutely sufficient if *one* of both can accept incoming TCP connections. Or in other words: Just connect to the same ultrapeer and search of a well-known file shared by your friend. You can then see each others IP address, browse each others list of shared files and of course download from each other. Most of the time, you don't even have to be connected to the same ultrapeer.

1. Did you configure your firewall so it allows LW full access (advisable not to have 2 active firewalls b/c they can interfere with each other); Firewall configuration instructions (click on link)

2. Modem & router NAT firewall concerns also: Connection problems? Check here first! (click on link)