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Web cams are very poor cousins of actual video cameras. You can record but it will not be of much use when viewed on a large screen. Moreover, the resolution and fps would be very low giving you a blurred and jerky movements. Not worh the effort.
Windows Movie Maker (free with Windows XP) will allow you to make video movies with your webcam. Instant messenger programs (free) like Skype, AIM, Yahoo Messenger, etc. will allow you to sent the webcam video to other users.
I had the same problem with the Extensa 5420-5687 as well, I went to the device manager and found my crystal eye webcam (there was a yellow exclaimation point on it) I tried to update the driver software by having it search automatically for the software, but it just said that it was up to date...that still didnt fix my problem. So i tried browsing my computer for the driver. I picked "let me pick from a list of drivers on my computer" I then clicked on "Acer crystal eye webcam" then i hit next, it then installed the updated driver. After that my webcam worked again!