Is there a secure video conference program or webcam transmitter for
Windows XP? I want to share 2-way peer-to-peer video with someone over
a completely encrypted connection. The software or combination of
softwares must cost less than $60, and I'll only be totally happy if
they actually work. THANKS!

For the encryption you could try to setup a Virtual Private Network
(VPN).  Which is a popular way to encrypt a connection to a LAN.  You
should be able to find a solution to establish a VPN connection and
then it doesn't matter what video conferencing tools you use. You can
get more information here http://www.vpnlabs.com/ and many hardware
providers have VPN solutions bundled into routers
(http://www.cisco.com/en/US/products/sw/secursw/).

Hope this helps.