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Sorry. I don't have a solution. Just confirming that you are not the only one. Just in case it matters, PC-1 is a Windows box, and PC-2 is a Linux box, but I have had the issue between PC-1 and PC-3 also, with PC-3 being another Windows box.
Ok good, I'm not alone. You've described my issue to the T. Both my machines are Windows 10, but it seems like it's not OS related.
For now, my workaround is to disable streaming on the host AFTER launching Steam but BEFORE launching the VM. That way, it reads the stream-on setting that was saved the last time I closed Steam. This workaround sucks because, let's be real, how often am I gonna remember to disable streaming every time I launch the VM and enable it again every time I close the VM but BEFORE I quit Steam?
[UPDATE: FIXED]
Turns out that Nvidia's wonderful GeForce Experience had fallen over its own feet earlier this week and broke my graphics drivers, to the point where I could no longer update them by hand either. Uninstalling all the Nvidia stuff from the Windows machine and installing freshly downloaded drivers fixed the problem.
I have nothing but AMD hardware. I don't think we have the same issue... or that this is a fix. This is definitely a Steam issue related to streaming and the instance of two clients running on a local network.
ISSUE
Connecting to Steam on Computer B with in-home streaming enabled will crash Steam on Computer A. This happens before any actual streaming has occurred or is attempted.
SETUP
Local Network
Computer A: Windows 10, GeForce GTX 660 on 361.75 drivers
Computer B: Windows 10, GeForce GTX 970 on 361.43 drivers (.75 has issues with Surround)
STEPS
1. Start Steam on Computer A with in-home streaming enabled in options.
2. Start Steam on Computer B with in-home streaming enabled in options
OR
Reconnect to an already running instance of Steam on Computer B (by for example waking Computer B from sleep, or disabling and then enabling network connection on Computer B) with in-home streaming enabled in options.
RESULTS
7 times out of 10, Steam will instantly crash to desktop without any error messages on Computer A. This happens even if no game is running on Computer A. If a Steam-game is running, the game too will suddenly CTD without error messages a few minutes after the Steam crash, even if Steam is re-started before the game crashes. The former I've tested thoroughly and have been able to repeat over 20 times. The latter I've only tested with Football Manager 2013, but have also been able to repeat numerous times. The latter is espeically troubling to me since it results in unforeseen game crashes and resulting loss of unsaved progress if I sometimes forget to disable in-home streaming or completely exit Steam before leaving a computer.