Not for the first time, a solution seems to be almost in reach. It's been a longtime coming.
We've almost got reliable 640x480 (or more) 15fps point-to-point video with reasonably sharp edges and decent management of suboptimal lighting. That's enough to support facial expression tracking, and to enable sharing physical white boards.
Here's my summary of the state of the technology based mostly on my personal experience:
- There are now reasonable quality USB 2 webcams, but focusing beyond 10 feet can be a real problem. Autofocus, even when it exists, is slow and unreliable.
- Current webcams have very limited dynamic range. They seem to be tuned to keep from blowing out the high (right) end of histogram, so contrast extremes produce a lot of dark areas. Glare from reflected lights are a real problem. We need next generation sensors to improve the dynamic range.
- Our CMOS (vs CCD) webcams have surprisingly good light sensitivity, even with small lenses and tiny sensors. I often find better results with relatively dim but indirect lighting.
- I'd like to see some levels on the webcams to help with orientation. Oh, and a $%!$! tripod screw too. Velcro tape and black tape are most helpful, yeah, just like in the movies.
- Relatively modern laptops seem to have just enough horsepower to do at least 640x480 at 15fps with the newest variants of adaptive h.264 compression. That seems to be the current practical limit.
- Our networks are a problem. Attacks on BitTorrent seem to be taking out iChat, and possibly other video conferencing software. Comcast gets a lot of criticism; but it may be regional and it's not clear that DSL is always better. Comcast @Work may be better, but I have no real evidence yet. [see update]
- Gmail based Google Video Chat (Vidyo technology) has given us the image quality we need on both XP and OS X. It hasn't, however, been very robust.  GVC is point-to-point, no multicasts. It also has voice quality that's sometimes excellent, but we prefer to use standard phone conferencing.
- Stack Overflow likes Oovoo and Adobe Connect. Both have some multi-user support, but in our tests OOvoo had a lot of dropouts. On the other hand, we've had GVC issues as well.
 Incidentally, Google's help forums are a waste of time. I think the XP to OS X connections have problems when a corporate VPN or firewall is involved, the XP to XP connctions seem more resilient.