The terrible net connection can be overcome reasonably well just by lowering the capture resolution and bit depth of the image.
Not sure how well it would play with others, (other software) but virtualdub has many useful plugins that are VERY fast, and has a frame-server mode, and supports live capture.
It may be possible to use it as a source with your camera, and get a marked reduction in resolution and bitdepth without smashing the shit out of your image fidelity, prior to mpeg encoding and delivery.
The problem you are going to have is that most webcam streaming solutions are single-cast based, rather than multicast based. This means per-session bandwidth consumption. This is going to seriously make your webcam experience less than enjoyable if you have more than just a few viewers. Youtbe like services made video sharing easy and effortless for the masses, but prevent live performance due to their nature.
Two technologies that are "Tried and true", are Shoutcast and windows media encoder.
http://www.shoutcast2.com/install-shoutcast-server/http://login.netromedia.com/solutions/View.aspx?ID=ac126911-d663-4e27-8843-97b9e439bb01Shoutcast should be more amenable to taking pre-processed (resized) input from Virtualdub's frame server, then doing the grunt work of encoding it into a stream that can be pulled by connecting viewers, since it has a *nix port. Virtualdub has assembly optimized resize and bitdepth changing plugins that are obscenely fast, which is why I suggest it.
That would allow you to attach a very nice camcorder type camera to a cheap USB capture device, and get good video/color, but more easily configured bit-depth and resolution on the stream.
Despite the linked guide's statements about streaming audio, shoutcast server is ALSO able to stream video.
http://www.scribd.com/doc/19781412/SHOUTcast-Audio-And-Video-Streaming-Guide
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