The correct procedure to start a videochat is:

1. Open MSN Messenger and sign in.

2. Click Actions, go to Audio/Video and click Start a video conversation.

3. Select a friend from the My Contacts and click OK.

4. Wait until the person you invited accepts your invitation.

More information you can find on Microsoft webapge about videochat settings and others.

If you still can't use your webcam, maybe it is damaged or the network administrator blocked this service on the network.