Publishing and receiving a webcam broadcast

Hmmm now I've got a problem with video quality. I've set the broadcast video to be the maximum the webcam supports 1.3mpx. My local preview embedded video though is 160x320, with the remote display being at 320x240. On the receiving end though the video is displayed at the right size (320x240) however it appears to be a 160x120 stream stretched to the proper size...

Any idea why this is happening?

Thanks a lot mm_patrick. That's pointed me in the right direction. Hopefully I can get at least most of the way there without bothering you again :)

Have you checked out the samples on devnet? You should find everything you need there.

Why are you using rConn instead of sConn to establish your netstream?
sConn = new NetConnection();
sConn.connect("rtmp://localhost/1", "test");
lStream = new NetStream( rConn);
I think this was just a typo.
When you publish, give it a name:
Instead of using: lStream.publish(localCam);
do lStream.publish(username); // where username is a string
Check out the flashmediaserver_cs_asd.pdf, page 102.

Also, currently you don't care whether or not the connection has been established. Make sure you wait before you create your Netstream on top of the connection. There is a great article on how to build such an application on Adobe Devnet:
http://www.adobe.com/devnet/flashcom/articles/broadcast_receiver.html

To build a 2-way chat you would also have to put both users in the same "room". The easiest way to achieve this is to create new application instances for each new user pair, then connect to with rtmp://host/application/new_instance _name and play the video of the other user.

There's some information in article http://www.adobe.com/devnet/central/articles/vchat_04.html
This article is about how to build a 2-way video chat w/ central, but you can possibly strip out that code.

Instead, I recommend having a look at the docs, i.e. flashmediaserver_cs_asd.pdf to be found in your documentation directory.