Thanks all. In the end I just went and bought the Microsoft VX3000. It's not exceptional but at least I know the Lifecam range works OK with our setup.... I know quite a few MSN user friends of the kids have very buggy cameras that only work half the time.
Gave up on the seperate mic and told the kids to put up with the sound... didn't want another device with a lead on it cluttering the desk.
As for the 12mp ones... when looking I did notice many budget brands with daft claims for their resolutions.
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New webcam? Seperate microphone? new
New webcam? Seperate microphone? new