Shouldn't make any difference if everything is set up the way it should be.

What OS are you running on? Any firewall?

Windows 7 and xp. Possibly I have some networking services disabled? Maybe something related to file sharing? I'm not sure. Also both computers can't connect online at the same time but that might be because they have the same ip.
I'm going to try to set up linux on both boxes and take out my router to see if it works.

The game isn't aware of the firewall you're running (guess the Windows built in one?).

The game consists of three executables that all have to be able to connect with each other: hedgewars.exe, hwengine.exe and hedgewars-server.exe. Best/easiest way would be to add all three as exceptions and allow them to connect to/from anywhere.

Other than that no special settings should be necessary while playing in local network. You shouldn't have to touch any router related settings unless you want other people to connect to your server (over the internet).

If you're able to view web pages in your most favorite browser all necessary networking services should be installed.

Just to be sure: If it still doesn't work, tell us your network topology (i.e. who's connected to what/how).

Both firewalls are actually disabled.

setup
pc to router to wireless access point to pc2

Maybe your wireless connection is just too instable. Tried it using classic network cables? Another idea: Some router configurations disallow connections between PCs within their own subnet to make it more secure for participants of public access points.

Just directly connected both but still wouldn't work. They were able to ping each other. I think it must be something to do with windows on one of my machines.

It works on Linux with my default network setup. I did it with crunchbang and ubuntu. It was really annoying getting all the dependencies right and everything. Also one of my pcs fails when the game starts loading the progress sprites.
But it works.
Thanks for the help.