Hello Stephen and all.
Correction, that must be Skype 7.40, not 17!..
I am not sure if SkypeWatch is always able to read the notifications, especially if this is an already ongoing chat. However, try going to Tools / Options, notifications settings, and verify if the option for showing a notification when someone sends you a chat is checked.
BTW, if using the normal scripts installer SkypeWatch should be installed authomatically, but if she is not able to hear other alerts as well, make sure if it's active; pressing insert+q from within Skype with Doug's scripts installed, one of the info it'll say is weather SkypeWatch is active or not, or if it's installed via the older procedure.