Another person reported a problem connecting tonight (only between those 2 friends; they could each join other people), then reported back that this was a known issue with Xbox Live, affecting multiple games.
They didn't mention exactly when it started, though; the error code was also 0x0043 in that case (which just means Xbox Live failed to create a connection).
They didn't say how widespread the issue was, just that Microsoft confirmed other people were reporting similar issues. It may only affect certain games (such as those using peer to peer connections, rather than multiplayer servers), for example, or it could be a separate issue in your case.
Have you tried joining through the lobby, as well as the invite function?
If you have the online visibility set to invite only, try increasing it to friends only or public.
Have you tried switching who was hosting?
Have you tried hosting/joining an Arena match?
Have either of you tried playing with anyone else?
Can you try switching either or both Xboxes between wired and wi-fi connections, if available? A couple people in the same household who got this error when trying to connected managed to fix it by having both Xboxes connect via wi-fi on a different network than the wired connection. Using a different network shouldn't be necessary if you are not on the same LAN, but maybe the connection method will make a difference, if you have not already tried that.