This post tells you how to test the Eee PC web camera using only PupEee version of Puppy 3.01.  PupEee has a command line tool called ffmpeg that can be used to capture or convert video files.  I am not linux expert and this was done based on posts in the Puppy forum.  I need to acknowledge the references that I used to do this.  The first is a post on the Puppy Forum:
http://www.murga-linux.com/puppy/viewtopic.php?t=26461
The above post was done by "tommckelips".  The other reference is the
documentation page for ffmepg at:
http://ffmpeg.mplayerhq.hu/ffmpeg-doc.html
The documentation is good and you should read it before attempting to use ffmpeg.

First one needs to ensure the web camera is enabled in the Bios.  At startup, you need to go into the BIOS setup and make sure the web camera is enabled.  Pressing "F2" key will get you into the BIOS setup.

Second, one needs to make sure the needed drivers are present.  To install the drivers in console the following commands are needed:
modprobe videodev
modprobe compat_ioctl32
modprobe uvcvideo

Next check with the ROX file manager (Home Icon) to make sure device video (/dev/video) is present.  It should be a link to /dev/video0.

The following only captures the video stream without any audio.  As they say in the text books, the audio is left as an exercise for the reader.  In console, enter the below command:
ffmpeg -vd /dev/video -f video4linux -r 25 -s 640x480 -sameq -y test.mpeg

The above should start ffmpeg is capture mode using the web camera.  The options are:
-vd  specifies the video source,
-f specifies the video format (ffmpeg supports many formats, read the docs),
-r 25 specifies a frame rate of 25 per second,
-s 640x480 specifies the frame size in pixels
-sameq tells ffmpeg to has the same quality as the source
-y tells ffmpeg to overwrite the output file if it exists
and test.mpeg is the output file in the /root directory.

You should see many lines of output in the console window.  After a 10 or 20 seconds, hit the "q" key to stop ffmpeg encoding and close the file.  Do not encode for too long.  The resulting file is uncompressed video.  On my first try, I go about 16 megabyte file for about 14 seconds. One can use GXine to view the resulting clip (test.mpeg).

The above has worked twice for me.  I know now that the web camera does work in Puppy  I hope this helps.  To the powers that be (moderators,etc.), please feel free to transfer this to the Wiki.

Enjoy life, JustGreg
Live Well, Laugh Often, Love Much