Apparently there was an issue with using Skype with video calls on the HP Mini-Note with Vista (the default OS) which was fixable only by “upgrading” it to Windows XP (heh). According to jkOnTheRun, Skype 4.0 Beta works much better:
I am happy to report that the quality of the video Skype chat with Kevin was acceptable and I found the video to be higher quality than the old version of Skype. There was a little bit of choppiness at the beginning of the call but Skype quickly settled down and there were no issues with the video and the audio quality was excellent.