Does it do it with any other programs that you use the cam for? Yahoo messenger or other webcam programs? Sounds like an MSN problem. I would try getting the latest version of MSN Messenger.
it's not msn messenger anymore...it's called Windows Live Messenger, and the latest version is 8.0.0812.00....you can get it here... http://get.live.com/messenger/overview (microsoft doesn't list the version number for the download...it's always the latest verson available for public release though).