For Skype to work correctly, it needs speed.
I would check what applications are running. Check which programs load at startup, remove any not needed. This should be done regularly.
I bet Skype will work fine without video, which uses a lot of processor power.
If so, the test call facility may also give terrible sound, but sound should be ok on a normal call.
Also check the version of Skype you are using is ok with your os:- WXP.
This is quite old now. e.g with W2000, anything later than Skype 22.214.171.124 will not work.
Please advise back on progress.
As a matter of interest, where are you based? I am in Hammersmith, West London.
Good Luck - Keep us posted.