Been playing with this for a few more hours, it turns out either MS/Skype haven't told us something or maybe we just have to figure it out ourselves (I am a regular on the Skype community and they don't have answers either).
Anyway as mentioned I get different results on different devises so on my Desktop I cannot see any way to link contacts as the Skype ones do not show up at all, but then when you think about it, why would you want to use Skype this way on a desktop, the desktop program works fine and so does Skype through Outlook (With 365).
But I just sorted out my Stream 7, trying to use the desktop program was a farce and the Skype Translator didn't work any better than the old "Modern" Skype app they discontinued, so fired up the setting on the Stream and low and behold the new Skype apps actually now make sense and my Skype contacts showed up so from the people app I can IM, call and video Skype.
Checked the Surface Pro and good to go there (Desktop program just about works but I can see the apps will eventually be better if you are using the Surface as a tablet rather than laptop, but when you plug in a keyboard and mouse to be more laptop you can just fire up the desktop Skype program anyway.
As mentioned at the moment on the phone you can see both IM's and standard texts, the texting is at some time going to show up on the apps anyway.
Begrudgingly I can actually see this working and for the first time in months Skype now makes some sense on tablets, haven't been able to use Skype on the stream for months.
Long way to go but some progress, but why didn't anyone mention that somehow Windows 10 can tell the difference between a desktop and a tablet, I tend to do all my experimenting on my desktop and was hitting a brick wall.
Will try out a few more features and report back.