I tried this on my HTC HD2 running WP7.
The audio calls work fine, but only through the speaker, not through the earpiece.
There needs to be an ear-piece toggle.
The video works fine landscape, but not portait as the image is inverted both horizontally and vertically.
The quality of sound was excellent on an audio call, but it was unusuable when it switched to video, too.
@waltmanc: Which custom ROM did you use to get WP7 on your HD2? DFT?
I recommend to download the latest Skype and search first.
To get the most out of Skype I recommend Skype Premium.
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