Simply right-click on any flash movie in ustream.tv (e.g. the one on the home page of ustream.tv) and set the microphone and camera to  your iSight or whatever you want and done. My guess is that sometimes the Adobe Flash camera recording applet has messed up default settings. Thanks for the excellent support, Chris!

From email from Chris Yeh, ustream investor of some sort:

QUOTE 

Here's something the team found:
 
"You may have have to update your Flash setting, however. If you are finding that     your iSight isn't working with Flash, right-click on any Flash movie and choose     "Settings...", then click on the camera icon. Choose "IIDC FireWire Video" from the menu. You can also use the iSight for audio by clicking on the microphone icon and choosing "iSight"."
 
END QUOTE