Edit: Ok finally found out the culprit. Yes I was skipping or was confused when editing:
<!-- Only specify these two if you really think you need to. (read: You don't) -->
<!-- <address>some.server.com</address> --> <-------------- The culprit
<!-- <localaddress>192.168.1.XXX</localaddress> -->
It was on the step to configure the local login server I have inserted the local address on the wrong area, and up until now I thought this section was only used for those who were using Minilogin. Enabling the <address></address> section and inserting the server IP did the trick and now I can login from my 2nd PC. Now comes the fun part... outside LAN connection.
Sorry for the fuss. Note to self, re-read the install instructions at least 5 times.