Kluppy,
Just use the cable configuration exactly as suggested by Dave in Post #2. For Xon Xoff handshaking you only need to have the hardware pins at the machine end bridged to keep the machine's uart happy. Make sure you have the machine control parameter set to use DC1 to DC4 characters (software handshake characters).
Post the error that you're getting when sending data to the machine; it will be easier to help you if we know what the problem is.
Regards,
Bill