QuickCam E 3500 working from Cheese, but not Skype

Well for me the issue was solved with my logitech which is slightly different that yours.

I have Logitech, Inc. QuickCam E2500 series but have always had skype problems until I edited the main menu entry and inserted a special command Here is how:

First access Main Menu via your special key (windows logo) and type 'Main Menu' Up comes Main Menu,click on that and then under Menus>Internet you will see Skype. Left Click on Skype and on the right hand side select Properties. Here is the name and command used to open Skype as well as the icon etc etc

In the command box paste the following command as it is written below:

bash -c 'LD_PRELOAD=/usr/lib/libv4l/v4l1compat.so skype'

Select close and shut down the menu

Now when you open skype your web cam should function

Try back in Skype> options>Video Devices Hopefully now where it allows you to select webcam it should say something like USB Camera (o46d:089d) Hit test and see what happens. Let me know if this helps or not This has been a continual pain in the rear for Skype /Logitech users which used to be solved by opening using the same command in the terminal but that is SO boring so adding it to your menu entry does it for you.