Chat room dialogue

I'd base the decision on the target audience. If I was writing for kids to twenty somethings I'd set it according to the screen format of chatroom. If the target is more "mature" I'd format according to normal conversation.

Just my opinion, but I'd go with a more standard dialogue format. If they can all see each other on a webcam, you're going to want to put some description of what they are seeing while they are typing, and I think it would just be too confusing to read if you did the dialogue in chat-room type format.

Why not write a chunk of dialogue using both formats? Then, you can show both types to a few readers to get a majority view of which one works better.

Sury

I've written stories in which the internet plays a major part for, I dunno, maybe ten years now, and I've found that many readers get pretty confused when conversation taking place online is treated like dialogue. It's especially troublesome if the characters chatting or IMing also speak to anyone in the same physical room as their computers.

For that reason, I'd suggest a format that sets off the electronic chat from dialogue. There are many ways to go. Among the easiest and clearest is something like this:

SheSays: Hey, are you online 2nite?
HeSays: i'm here
SheSays: What's up?
HeSays: nothing much. going out to eat with the rents in an hour.

Damn Grandma Kelley and her birthday. He didn't want to go to some geezer restaurant where they'd sing "Happy Birthday" because his dad was paying them to.

SheSays: Are you still there?
HeSays: yeah, sorry. i don't want to go out is all.

This makes it perfectly clear that they're not speaking aloud. (Some day, when we all have voicechat, it's going to get pretty dicey!) It works for private chat and IM conversations. If you want them to be chatting in a room in which others are also chatting, it grows more complex, but it can be done.

Maryn, apologizing for the quality of the off-the-cuff example

I've used something similar. The dialog has traditional dialog tags but is all in italics. The Shesays/hesays can get kinda old.