Cannot connect MBP to IMac

My MBP is running snow Leopard and my iMac is running leopard.

I am using a Motorola NVG510 modem via ATT. Ethernet cable from modem goes to Gen 1 Time Capsule with wireless turned off then to my iMac. Another ethernet cable from the Motorola goes to an Airport Express which extends the Motorola network, through which my MBP receives internet.

I have on my iMac an external drive shared, AFP. Finder on my iMac see my MBP and loggin on to it is no problem. ON both machines "accept all incoming connections" is checked. (Is that safe? There is a firewall on the modem)
However, although Finder's "shared" segment on my MBP "sees" the time capsule and my iMac, and I can connect to the time capsule. When I click on my iMac though the windo goes straight to "connecting," and does not give me the op to do a "connect as"
Of course the connection fails.

I went through my Keychain and really saw no references to my iMac on the MBP.
Any help appreciated

John

I should add that when the connection fails the error message that comes up is:

There was an error connecting to the server Xxxxx. Check the server name or IP address and then try again.

If you are unable to resolve the problem contact your system administrator.