I have developed a similar problem since I upgraded to Vista Ultra.  But, I get the message that another app has the hp webcam opened.  I cannot find any other app that is using the webcam.  I called HP support & was dissappointed.  First they told me that during the upgrade to Vista Ultra Windows installed another copy of YouCam & that is what is holding hp webcam.  But, that doesn't sound very plausable that Windows is installing an HP applications.  Also, task manager doesn't show YouCam running.  So, HP support told me they don't support Vista Ultimate which got me out of their hair & made them happy.

 But, I want to RDC to the touchsmart & I want to use Vista Ultimate to do the remote.  If I have to I will do without the webcam.  But, I sure would like to have it.

 Any suggestions apprecieated.

I had the same problem and i troubleshot it the whole morning. its the webcam upgrade from hp health check that messes it up. Also if you have sp2 version on your comp then that also creates trouble. what I did that works was i opened the windows recovery manager located in the programs tab. then i clicked yes when it asked me if i wanted to recover a program. Click yes and then look for the driver that says something like recover sp1 updates something along those lines. then after that youll have to restart. from there you open up recovery manager again and there should be more drivers look for the hp webcam and click next but before you do that***MAKE SURE YOU UNINSTALL THE OLD WEBCAM DRIVER which you can do is go to control panel and click hardware and sounds then go to device manager. then go to imaging devicee and right click on the webcam and press uninstall. Now your ready to reinstall the new driver. so after you install it it will ask you to restart. do it. then click the quickplay media smart button and click the movie button. then webcam should be able to be clicked on. hope it works.

LISTEN...tnis took me many attempts, but finally JUST did following:
START right CLICK on computer then MANAGE...CHOSE DEVICE MANAGER and than located HP WEBCAM which was under Imaging. I uninstalled, rebooted and then it installed driver again and ALL WORKED. HOPE this saves you some time.

Stizzy,
I'm having the same problem. Nothing seems to work. And the HP chat people simply suggest 'reinstalling the OS' Hopeless. Helpless. Driving me crazy. I've reinstalled, tried other versions of the mediasmart software, and just about everything else I could think of. Nothing seems to work. Win 7 64 bit as well.