Spoogie,
I am very new also, and I too went through the instructions.  And early on I was very frustated.  But after a couple of weeks (probably a total of !!! 22+ hours !!!), I have a working local server.  
I believe the most nebulous piece to my puzzle to find was this:
when you last patched eq versus what minilogin expects for the patch date
So like in your example I was getting "incorrect version". (plenty of posts about that if you search)
One day I read this post:
http://forums.eqemu.net/viewtopic.ph...c28c654ff0c3ea
So I patched the latest with Ver@nt.  I then downloaded the file mentioned, and then it was working.  (I set my eqhosts.txt back to local also etc)
It sounds like from your post that you have your router/ip/xp issues taken care of.  After you get this login problem fixed, it will probably be zones, doors, npcs, etc.  (We are waiting for 0.4.1 for roaming npcs)
I had problems with finding the questions on why it all doesn't work; but once I understood the questions better, I found answers in this forum using Search.  It sounds kinda silly, but if you just read all the new posts every few days, it helps.
 :!: