I think I've mentioned that I've been playing in a D&D game via Skype. In general, it has been working quite well. The biggest frustration has been combat. Without a battlemat, combat in 3.5 is... well... tricky.
We considered a few options. Last game, however, our GM hit upon a great, simple solution: Google Docs.
She set up a spreadsheet in the form of a grid, and she shared it with all the players. We could all edit the sheet simultaneously. We just typed our PCs' names into the appropriate squares and cut and pasted them around as needed. The cell backgrounds are easy to color, and you can even drop in images... or Google Draw pictures that you create within the document.