tech.gsr, on Linux2, you can check the output of the command:
that should tell you what interfaces you have on Linux2.
You only need to configure firestarter for eth0, it sounds like you are also configuring it for a bluetooth device. There is a wizard in firestarter, did you use that to set up Linux2?
Also, if I understand your setup correctly, you do not need to set up IP forwarding or NAT on Linux2. The more complicated setup is on Linux1; is it set up OK now?
Is your plan to use Linux1 as your firewall/router and move your Win XP boxes to the subnet connected to eth1? Firestarter should work fine for this, it is how I have my home network configured.