I’ve never used Windows Live Messenger (WLM) for video chatting but I understand it is pretty good, and I suspect you should be able to get fullscreen. I haven’t used windows in a while but if I remember correctly you should be able to configure your webcam for WLM somewhere under “Tools” in the menu. It might be called “audio and video configuration”.
Basically if it is installed correctly I don’t think you need to change anything in the settings. All you need to do is to click the camera icon, or something like that, that appears when you open a chat window. You should be able to start a video chat by right-clicking on the person, on the userlist, you want to chat with as well. I’m assuming you’ve added your grand kids to your messenger..
Sorry if I’m not of much help here.. DSL should be ok for video chatting so your problem with google video probably isn’t related to your internet connection. Maybe you have a router or firewall that is slowing down things?
I hope someone here who uses Vista and Live messenger can help out.