I figure out what was wrong:

1) 445 was indeed blocked so there was that problem :-)
2) I had to bind to my server's IP address as the hostname instead of
localhost (not sure why)
3) Windows vista requires NTLMv2 authentication which does not appear to
be supported. To work around this one must change a registry setting:

HKEY_LOCAL_MACHINE\SYSTEM\CurrentControlSet\Control\Lsa\LmCompatibilityLevel


Should be changed from 3 to 1.

After all that we are good as gold.

-paddy