I have done it once and it is great fun. The first step would be to connect with your buddy. There are three ways to do that. One is indeed FSHost. The other two are from within FSX, either Gamespy or direct connection. My choice would be the last one, if you are doing it with a friend that you know and you can share the IP address. One should be the host and in order to do it there are some ports that he will have to forward on the router. I do not remember all of them now but an internet search might reveal them. The host should have enabled cockpit sharing before starting the session. Once connected in free flight you can share the cockpit and pass controls from one to the other via a key combination that I also don't remember right now but can be proobably found within FSX.
I will do some research and get back to you, unless some other kind soul lends a hand.