After watching the screencast (several times) and downloading Hijacker Pro onto my Mac, I carefully set out to select all of the correct preferences. i am recording them here as a reference for my next try at this.
System Preferences (Output USB headset/ Input Internal microphone Built in)
Skype Preferences (Output - Built-in Internal speakers / Input - USB Headset)
Hijacker Pro Preferences ( Output - Built-in Speakers / Input - USB Headset)
A quick tweet to Lisa Durff and I was ready to chat via Skype.