The other day they were hissing and growling, and today I let the small one out (Puddy Tat) and they had some non-violent interaction! Puddy is no longer scared to death, and the hepcat is much calmer, his fur didn't even stand up.
Here's the hepcat licking the puddy. You can also see some stuff on the floor under this chair. I think there's a sock and a plush lobster under these cats. I had to lighten the image so the puddy is viewable, he's rather black in color.
Here they are hanging out. They're not ready for unsupervised togetherness yet, but at least they are not fighting! A bit of a fight did break out later, but I don't think it was violent, and nobody got hurt. Nobody made any weird cat sounds, either, so I'm probably the only one that was upset about it :)
Since neither of them seem too upset about the encounter, I feel good about them eventually becoming good playmates for each other. I'm all :