Here's a quick video I shot late last night of the Skype payphone actually working. It rings and can be used as a Skype phone for any call, SkypeIn/SkypeOut and it's just really really cool to have a working VOIP Skype payphone in one's living room. Next up getting it to take quarters so you can make calls and using the keypad as username and password entry.
Now if only he could make the handset wireless it would be practical too. :)
(8.2mb Quicktime video)
More info: MAKE: Blog: Skype Payphone Video
Also spotted at: Eric Rice :: Video: The Skype Payphone