What you need to use is the docking hud. The easiest way to get the docking hud setup with the target craft is to use the docking MFD and click the "Hud" button. Then you'll want to turn toward the circle cross and burn till the numbers say 0 or as close as you can. It will drift around quite a bit so you'll have to reposition a bit. When the number is large use the rotational thrusters, when it's small use translation, and when it's really small, use the control key plus the translation thrusters.
After this, point toward the target and burn a little bit, either thrusters or engines, but be careful if you use engines so you don't overshoot. You'll then see a cross. This is your velocity relative to the target. The numbers indicate your velocity in meters per second. Here's where methods differ. You should see a series of boxes leading away from the target dock. They may appear as lines depending on your orientation. Use the translation thrusters to position the cross over one of the boxes. Some people always go to the farthest box, but I usually position it to within one or two boxes of the port.
Depending on how you approach the target and whether the target's moving, you'll probably have to reposition the velocity indicator a bit so you don't go flying off in another direction. Once you've gotten to the green box you were aiming for, again null all relative velocity. Turn toward the circle cross, or use reverse translation thrusters or retro engines. Now, you'll need to do the same thing you did to get here, except this time you're aiming for the docking port so orientation matters.
Once you're facing the docking port you should see an "X" in the docking mfd. This indicates your orientation in pitch and yaw relative to the docking port. Get the x centered on the center of the mfd as close as you can using rotation thrusters. Then get the green cross centered on the white cross as best as you can using translation thrusters. Use the thrusters to start moving toward the docking port, adjust a little for drift and rotational drift and at 0.3 meters, you should dock!
Good luck!
Zat
