I realise this is resurfacing a slightly old thread, but I just wanted to confirm this works and was really easy to setup!

My wife just got a new dell netbook with webcam. We both have gmail accounts and can see each other online when on the iGoogle home page.

She installed the google talk plugin, clicked on me in her chat list, chose "video and more" option and inititated a call to my N900. On the N900, I got an incoming call from her, answered it and up popped the screen with an option to turn on the camera. I did so, and she could see me - but I could not see her - just her avatar was displayed on my N900. I could see myself though.

She ended the call and had another go and we had perfect 2 way video. No stutter or anything. This was in different rooms in the same house via the same wireless router, and I thought the video quality was quite acceptable as long as my face was in direct light (a table lamp for this test).

I will test this tomorrow from the office (WiFi), then try it over 3G to see what happens.

I think the last update (PR1.1.1) may have slightly improved the front cam images, but I may just be imagining it! I actually thought the video from my N900 was clearer than the video from her Dell

I think the reason we cannot initiate a video chat the other way is that we do not have the video plugin on our N900's. Hopefully Google are working on a linux version.