For those of us trying to make calls, the hangouts do not work, but you can still make "regular" video chat calls. Just start a chat and use the drop down box on the top right to start a video chat. That still works, it's just more hidden...

As an update to this issue, I eventually went ahead and wiped my phone and re-installed PR1.3 (generic version NDT). I then installed Gtalk (nothing else installed on the phone, no accounts configured - except nokia account to download from the store - I also tried with nokia account not configured and install using terminal), but still no luck. I used 2 different gmail accounts (one generic that I created in addition to mine) and it does not work for either. I also tried various ways of configuring the account on the phone (user name alone vs. user name @gmail.com). That did not help...

In short, it is definitely not working on my phone, and I cannot figure out why. I really wonder if that has something to do with Google's servers. I am in the US, maybe there is something in my gmail account that is different. Where are you based - when it works and does not work?