do both of you use xp?
from msn messenger help:
Audio To ensure we deliver the best audio technology for computer-to-computer or computer-to-phone communications from MSN Messenger, we have made technical enhancements. This means you will only be able to use Messenger version 4.5 or higher for these features if:
You are not behind a firewall or
You are behind a Universal Plug and Play (UPnP) firewall or
You are using a UPnP-enabled Network Address Translation (NAT) device
If you have any questions on whether you are behind a firewall or what type of firewall it is, please contact your ISP or corporate Helpdesk.
In the Audio Tuning wizard, if you choose "Game Compatible Device" on the "Select devices for calling" screen and then click Next, you will get an error message that indicates that the audio device you are trying to use is half-duplex. This is probably not the case; instead, select another device.
You may experience problems with MSN Messenger audio and video conferencing if you are using MSN Messenger version 6.0 or earlier and you do not have a network card installed on your computer. To fix these problems, please upgrade to MSN Messenger v6.1.
If you are using Windows XP and you have an Intel network card, you may experience problems using the MSN Messenger audio feature. Some Intel network cards enable 802.1p wireless connection support by default, but don't provide a way to disable that support.
Turning off the QoS Packet Scheduler may fix this problem. To do this:
In Windows, click Start, and then click Control Panel.
Click Network and Internet Connection, and then click Network Connections.
Right-click the network or Internet connection that is currently enabled, and then click Properties.
Clear the QoS Packet Scheduler check box.
Restart your computer.
Sign in to MSN Messenger and try using the audio feature again