OBJECTIVES: I. Compare event free survival after total body irradiation (TBI) plus busulfan versus TBI plus cyclophosphamide followed by allogeneic peripheral blood stem cell transplantation in patients with advanced myelodysplastic syndrome (MDS) or MDS related acute myeloid leukemia. II. Determine the distribution of pharmacokinetic parameters for busulfan in those patients randomized to the busulfan treatment arm. III. Investigate the prognostic significance for event free survival of prior history of red cell transfusions, cytogenetic pattern, and of functional drug resistance at diagnosis in these patients. IV. Estimate the frequencies of cytogenetic and genetic changes during disease progression in these patients.