LMcG: Many of us have experienced The same problems with MSN Messenger. I downloaded Firefly, which is an Australian Internet Telephone service similar to the Skype that you mention. I used Messenger to view the web cam and Firefly to chat.
I did find that when using both these programs the camera tends to use a lot of the computers resources and causes the audio to break up and can sometimes be so bad that it is impossible to hear the other persons conversation.
I have not heard of Skype before today and I do intend to give it a try when I can persuade some of my family to follow suit. Being able to transfer files will be an advantage over Firefly as you can't do that with Firefly.
I do think the only way to use both programs successfully is to have a good, fast setup. I have 1gig Processor and 512mb of Ram on my XP Pro. and that seems to slow to do the job properly. More Ram and a faster Processor might sort it out. I chat to my brother in Australia and we no longer use the camera, so now we have no problems chatting to each other, we just can't see each other.