I would first suggest that you try and restore the Default Gadgets. From here:
- Control Panel
- Appearance and Personalization
- Restore desktop gadgets installed with Windows
This should reset the setting and get it working. Also according to my understanding the Gadgets will NOT work if you have UAC disabled. If you prefer not to be bugged by the popup confirming permission you can change to silent elevation as described on TechNet here:
- Log on to a Windows Vista computer with an administrator account in Admin Approval Mode.
- Click the Start button, click Run, type secpol.msc, and then click OK.
- At the User Account Control dialog box for the Microsoft Management Console, click Continue.
- In Local Security Settings, expand Local Security Settings, expand Local Policies, and then expand Security Options.
- Right click the User Account Control: Behavior of the elevation prompt for administrators in Admin Approval Mode setting and select Properties.
Lastly, uninstall the Logitec Software and see if the problem still exists. The few references I have seen to this error seems to be related to the Logitech software, and it may be worthwhile (althought I suspect you have already) to check for newer drivers, or alternatively check if there is newer drivers on Windows Update. If the drivers is not the problem and it's the software to control the device, you may be out of luck. I am not aware of any replacement software, but most messenger client for examples can natively read the cams without the need for the official software.
Disclaimer: As a rule I never install the software that comes with the device, I rarely if ever use it or need it