Shockwave Player is not giving a clear picture and I already enabled the program. What else do I do?

Flash Player itself is not a video player, or web conferencing software.  It's a language runtime.  It processes code written by the content provider and does the low-level work of allocating memory and drawing pixels on the screen.  In short, it's not web conferencing software, but you could *build* web conferencing software on top of it.

How that software handles source webcam video resolution and scaling to fullscreen is entirely up to the conferencing application.  I'm guessing that whatever it is that you're using is really old, and probably expects old-school 320x240px webcam streams.  Scaling it up to a modern monitor would look terrible, in the way that you describe.  Flash Player can handle higher resolutions, but it would be up to the conferencing application to take advantage of the higher resolution video stream that's available.

It's also possible that they use some kind of adaptive bitrate technique to handle sub-optimal network conditions (i.e. if your connection isn't great, it will drop video quality to keep the stream working, rather than have it stop and start as it waits for sufficient data to traverse the network).  There's probably not much you can do about that from your end if that's the case, beyond maybe using a wired network connection instead of wireless.

There are also plenty of video conferencing options available that support high resolution cameras (many that don't use Flash).  If you're picking the conferencing application, you might want to test-drive some other services to see what gets you the best results.