From Kazza help: When you are connected to the network that is used by Kazaa, you are connected to only one (or maybe a few?) Supernodes. When you do a search, it will only search through the list of files from the people that are connected to the same Supernode(s).
There are however many Supernodes (thousands?) all over the world. So the chance you and your friend are connected to the same piece of the network is very small.
If you want to exchange files, there are much better ways. Most Instant Message Programs (MSN,ICQ,etc.) have to ability to send/receive files. Another good way is IRC, but that requires some more computer experience.
I would suggest Net Meeting.