THINK I got a possible solution.

what firewall/anti virus are you using.. ??

It just hit me that my firwall and antivirus software might be preventing the chat to run..
I killed zone alarm and chat started right upt he first time.
After it got going, I restarted zone alarm and have no problems.

also found out zone alarm was blocking some pictures because they are hosted off a different site (3rd party) and I have zone alarm set to block that.. i forgot I had set it up that way

try killing your anti virus/firwaall software, start chat and see if it works.