A long time ago I found some guide that showed how to use the Windows Hosts file to forward traffic to another IP/Port. We setup a clients server on one IP/Port, and they wanted it changed to another IP/Port on the same machine, but are now asking that we forward UDP/TCP traffic to it as well.
I am pretty sure this is doable but I cannot for the life of me figure out how to do it now after Google searching for a while.
You're probably remembering incorrectly. The only thing that /etc/hosts controls is local DNS lookups -- you can't use it to swap ports around or forward data sent from other machines.
You may be able to forward connections using a firewall package or router.