Not sure how much difference it makes but if you're firewalled then chat might be more difficult or with the other person. To configure your firewall to allow LW full access see: http://www.limewire.com/english/content/firewalls.shtml

Also see: How to Direct Connect, Browse & Chat

You might get that message for a no. of reasons. They might have closed the chat window for example if you take too long to make your initial chat. Just a thought.