To resolve the login problem, I attempted to remove my profile completely. This seems to have resolved everything.
Before performing the following steps, make sure Skype program has exited i.e. Skype shouldn't even be lurking in your system tray.
- Start Menu > Run
- Type %appdata%\skype
- Click OK button.
- Delete the folder bearing the name of your Skype login name. It may be in the form of <username> or live#<username>.
Your Skype should run okay now.
For Mac users, the path is User/Library/Application Support/Skype.
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