By 'Wireless modem' I asume that you really mean that you have a Wi-Fi (802.11) adapter of some sort. As you don''t say what "says it needs a key" it's difficult to help with that as well. You also don't say what you mena by "set up a wireless connection"
However I asume that you want the two PCS to share files and printers. Use the XP 'setup a wireless network' wizard. Whiuch will generate a file that you need to move to the other PC and run it. You will need to think of a name for your network (known as an SSID). The only tricky thing is that as you don't appear to have an "Access Point" or "Router" you need to set the network up in "ad hoc" mode.
Sorry if this sounds complex but I spent thirty odd years as a Systems Engineer learning how to do this stuff and now everone wants to do it at home without my training and experience. However please repost (with a new post) if you need to know more or need clarification.
Terry
August 2006