If you’re experiencing audio and video problems with your webcam after installing the latest version of Windows Live Messenger”.  According to the post, the problem stems from issues with McAfee Site Advisor, and while McAfee is working on a fix, there is a workaround, that recommends configuring SiteAdvisor to stop monitoring Live Messenger.

1. Navigate to the following folder:
   Windows XP/2000/Vista (32-bit): C:\Program Files\McAfee\SiteAdvisor
   Windows Vista (64-bit): C:\Program Files (x86)\McAfee\SiteAdvisor
2. Right-click on the file sasets.ini and choose Open With, then select Notepad.
3. Locate the section titled [msnmsgr.exe].
4. Change Enabled=1 to Enabled=0.
5. Click File and select Save.
6. Close sasets.ini and restart your computer for changes to take effect.