Will it lose the skunky smell?

I used a new kit produced by Canada Brew to make my latest batch. It is a red ale that I used LME and dry hopped with 1/2 oz of Hallerteau.

It is still in need of more conditioning. It has only been bottled for a little over a week so I was not expecting perfection but it was the first bottle tasted pretty good but was really cloudy and smelled sort really skunky. I store the brown bottles in a dark closet to condition. (Evil sunlight)

My question is will the rest of the yeast settle out over time and clean up the aroma?

Which Hallertau did you use? I made a mistake once (and never again) of using Hallertau Select and they were the skunkiest hops I've ever tasted. I should have not used them because when I smelled them, I thought they were quite funky/skunky, but I stuck to my plan anyway & used them for flavor & aroma additions -- they were nasty. As the beer aged, it became better but was never great.

Unfortuantely my LHBS only had them in stock as Hallereau. Can't get more specific.

I recently had a becks that was 2 years old and kept refridged that long. When I first had brews from this 12 pack they were skunky. However this old Becks had lost that flavor. Is this possible? Can uv damage be conditioned or lagered out?

Usually the skunky smell comes from the yeast producing sulfur like smells that are not too pleasant. The good news is that the smell will age out of the beer just fine, so give it some time to age and the smell will go away.