I am having this same problem, using Phone Gnome box and Uplink. I have tried various versions of Skype, and have tried Uplink 1.3 (as PhoneGnome is supplies 1.2) but all had the same problem.
I suspect this might be a Win2000 issue. I was able to get it to work on an XP machine, but I really need it to work on my 2K box. I went as far as doing a clean install of Win2K, and pulled out the sound card. But no avail. I get the same error as above in Uplink, and Skype says "Problem with Recording Device"
I world appreciate any assistance.
Bob