Echo Rotorcraig's experience.
With a headset (even one of those cheapo "telephone handset lookalike" ones) Skype is great. Wife chats with daughter in Germany for hours using it.
Skype video works fine (on broadband) with any webcam I've tried.
The cheap webcams have strange habits: the one I have here at the moment works for about 4 hours from PC switch-on, then gives very strange error messages. Some day I'll get round to buying a decent one...