I found this eetime article describing a video telephony system for the dreamcast - they continue to astound me. Not only do they have one of the cheapest web browers, but now this!

One problem was that the delay time was 700mSec. I'm not sure if this is round trip or one-way, but it could make talking very frusterating (remember long distance that was routed via satellite? It's delay wasn't as bad but it was still tough to talk. Now it's all done with fibre and the delay is gone)

The picture (which was in the latest issue of the print version, but not the online article) showed a speaker/microphone headset that plugged in like a VMU. The camera plugged directly into the dreamcast.

- john