OUTLINE: Low-risk patients (those in first complete remission (CR) who achieved CR with 1 course of chemotherapy) are treated on Regimen A. High-risk patients (those in second or subsequent CR who required more than 1 course of chemotherapy to achieve first CR or those with myelodysplastic syndrome) are treated on Regimen B. All patients undergo diagnostic lumbar puncture prior to beginning therapy and fluid is examined for CNS disease. Patients receive methotrexate IT along with the tap. Prior to initiation of chemotherapy, patients with CNS disease present on diagnostic lumbar puncture receive methotrexate IT every 2-3 days until lumbar puncture shows no leukemia cells and then 1 additional dose. Cytoreductive chemotherapy begins 3 days after the last dose of methotrexate. Regimen A: Patients receive oral busulfan every 6 hours on days -7 to -4 for a total of 16 doses and cyclophosphamide IV over 2 hours on days -3 and -2. Allogeneic bone marrow is infused on day 0. Regimen B: Patients receive oral busulfan every 6 hours on days -9 to -6 for a total of 16 doses. Patients receive cytarabine IV over 1 hour every 12 hours on days -5 and -4 and cyclophosphamide IV over 2 hours on days -3 and -2. Allogeneic bone marrow is infused on day 0. Graft versus host disease prophylaxis: Patients receive cyclosporine IV continuously on days -1 to 28 followed by a taper of oral cyclosporine until day 180. Patients receive methotrexate IV on days 1, 3, 6, and 11. CNS disease prophylaxis: Patients receive 5 more doses of methotrexate IT weekly beginning between days 50 and 70. In addition, patients with history of CNS disease receive 1 dose of methotrexate IT monthly for 1 year. Patients are followed frequently during the first 100 days, at 6 months, 1 year, and then annually thereafter.