This solved my problem...
I took some advice to add a new (unregistered with apple) email address to my facetime account.
I did this and was asked to login with my registered email and password.
I then got the dreaded
"The server encountered an error procssing registeration, please try again later " issue that so many others were getting.
I then folowed this thread which solved the problem.
basically I had to comment out some extra server rows I had in my host file. Then a restart was required.
in case you don't know, here's how to edit hosts file in lion