Setting up masquerading with iptables

[nogradi]

With the following layout I would like to set up a home network on a FC3 box with kernel-2.6.12-1.1381_FC3 and iptables-1.2.11-3.1.FC3:

machine A - eth1 ------------- adsl modem ----------- internet
|
eth0
|
|
|
hub
|
|
|
machine B


Pinging between A and B works both ways, I can access the internet from A and can ssh from B to A. Now I would like to set up masquerading in order to access the internet from B as well. I have the following rules:

# make sure we start from zero
iptables --flush
iptables -t nat --flush
iptables --delete-chain
iptables -t nat --delete-chain
# set up masquarading to eth1
iptables -t nat -A POSTROUTING --out-interface eth1 -j MASQUERADE
# allow forwarding from eth0
iptables -A FORWARD --in-interface eth0 -j ACCEPT
# enable ip forwarding
echo 1 > /proc/sys/net/ipv4/ip_forward

And machine B still can not access the internet. The gateway is set up properly, for example a traceroute google.com from machine B shows that it reaches machine A, but does not go further.

Output from iptables --list:

Chain INPUT (policy ACCEPT)
target prot opt source destination

Chain FORWARD (policy ACCEPT)
target prot opt source destination
ACCEPT all -- anywhere anywhere

Chain OUTPUT (policy ACCEPT)
target prot opt source destination

Output from iptables -t nat --list:

Chain PREROUTING (policy ACCEPT)
target prot opt source destination

Chain POSTROUTING (policy ACCEPT)
target prot opt source destination
MASQUERADE all -- anywhere anywhere

Chain OUTPUT (policy ACCEPT)
target prot opt source destination

All of this tells me that it should be okay, but still doesn't work.

Any ideas?