I got a call yesterday morning about Skype not being able to recognize the external firewire iSight's built-in microphone. The lady who I was on the phone with tested iChat and everything works fine. So all the hardware-side of things were hooked up correctly. The only possible hiccup is with the settings with Skype. I guided her through different screens of settings both in System Preferences and Skype to start the process of elimination to eventually seek out the wrong setting. Input Sound settings in System Preferences was showing the buil-in microphone for iSight as selected. So the last place to check was Audio settings in Skype.

It happened that the Apple Mac desktop she was using has a internal microphone already, and Skype by default selected that one rather than the one in the iSight camera. Changing the Input Audio device in Skype to iSight fixed the problem.