I think I have the correct path:
1. Set up Nicecast so it joins the Skype feed with the usb headphone mike feed,
2. Set up Audio hijack pro to record, installed hijack plugin so I don't have to restart Skype, and recorded call
3. Opened in Audacity (1.25 instead of 1.33 because of crashing problem), export as mp3 with bitrate set to 64.
4. Note had to re-export mp3 in audacity 1.33 in order to have the sampling rate be 44khz, 1.25 seems to export a stereo mix at 44khz and makes it 22khz or incompatible with Flash player.
Special thanks to Lee for his links/screencasts and the amount of time I was able to save because of his help
Note: File size/bitrate patrol did I get it right?