So that a caller knows you are in a conversation, it would be good to be able to automatically or manually set the status to busy. This would need to be a user selection and could possibly incorporate answering service or voice mail.

yes, that would be nice: another status: busy...
automatically changeing while you are calling or maybe also manually while you are on landline :-)

I wouldn't want Skype to set my status automatically as you can receive a call even though you are talking to someone else, and then you merge the calls to create a conference or talk to the persons separately by holding the other one in the mean time.
So these things should be done manually.

Really it should be a settable preference whether it is set manually or automatically. A "non-crucial call", marker should also be in place.