Okay, so I've browsed quite a bit but found no answer to my problems so I'll have to ask.
I run 1.5.2 and have used the built-in LAN mode in singleplayer to play with my roommate. This has never had issues. We both get Forge and I get "internal server error" when joining her, and she gets "timed out" when trying to join me. I reload my clean .jar file without forge and no mods and she can join me again just fine, but her game is now modded so I of course can't join hers. We wanted to make a new modded game (only using Biomes 'o plenty), so I take my clean jar file and install the same forge edition she uses (it was the latest two days ago, 7.8.0.707) Still not working with the same errors. I then set up a LAN server using the server.jar file from Mojang. Forge is installed to the server (same as ours), the mod is added and we both get the same errors we get in the regular game, only now I have logs.
Server.log
This repeats each time I try to log in. Same for my roomate.
FML-server-0.log
I don't really see any errors in the logs besides the booting, so I'm a bit lost. The issues only started after installing Forge.
Edit: We were unable to join each others games without mods too, after both had Forge installed. Forge itself works fine in single player, but it kills our LAN gaming.
Edit 2: I've tried running with both the MC launcher and the MagicLauncher, but it makes no difference.