OBJECTIVES: I. Determine the effect of marrow ablation with high dose busulfan/cyclophosphamide on engraftment, incidence of posttransplant relapse, incidence and severity of graft versus host disease (GVHD), and incidence and severity of nonGVHD posttransplant complications in patients with acute or chronic leukemia or myelodysplastic syndrome who are eligible for allogeneic bone marrow transplants from HLA identical/compatible donors but who cannot or should not receive total body irradiation as part of their cytoreductive regimen.