If it ONLY happens on chat sites, but not on other Flash sites (like News sites or Youtube), odds are it ISN'T Flash Player, but somewhere else.
There is a possibility that some third party program(s) installed on the computer are causing the issue.
I would suggest that you perform clean boot and check.
To help troubleshoot error messages and other issues, you can start Windows by using a minimal set of drivers and startup programs. This kind of startup is known as a "clean boot." A clean boot helps eliminate software conflicts.
Refer the below link to know more about clean boot procedure.
How to troubleshoot a problem by performing a clean boot in Windows Vista or in Windows 7
Reset the computer to start as usual
After you have finished troubleshooting, follow these steps to reset the computer to start as usual:
a) Click Start, type msconfig in the Start Search box, and then press ENTER.
b) If you are prompted for an administrator password or for confirmation, type your password, or click Continue.
c) On the General tab, click the Normal Startup option, and then click OK.
d) When you are prompted to restart the computer, click Restart.
Refer the below link to know more about clean boot procedure in Windows XP
How to configure Windows XP to start in a "clean boot" state
Got it fixed now, its the version 11.8 of Flasplayer that fails. Why dont Adobe fix this? Ill link a video that helped me and describes the problem.
Because Adobe DOESN'T run Omegle, Chatroulette or ANY webcam chat site. The owners of those sites have to keep up with the latest software or they end up going the way of Stickam and iVideoChat.