Apparently after SP1 installs Vista looks for a username/password to connect. I say apparently, because I had it networked before without this new crap I had to implement and it worked...
So in order for it to work I had to do the following.
On the Wife's computer I had to create a new user account with my computer's name and login password. On my computer I had to create a new user account with the wife's login name and password.
As soon as I did this, both computers could instantly see each other and connect without any lag. Is there a way around it? Maybe. I am tired of screwing with it, so that's how it's staying.