I'm using a Playstation Eye (eyetoy for PS3) and Freetrack. If you go on Freetrack, they have forums and guides on how to make a LED Cap for tracking. I've got mine working quite well.
Webcam works at 30fps with the software (Its capable of 60fps but no option) Those fps are interpolated for smooth motion, when you turn your head its very responsive, and lots of customization. I prefer 1:1 tracking, feels most realistic, don't care too much if I can't see over my shoulder =p
But I'm a lazy bugger, I only use it every couple of months, cant be bothered setting it up even though it takes only a few min.
- Oh and, unless you hack your webcam a bit, (floppy drive film to block out optical light, or removing the IR filter) you'll need to keep your room moderately dark. and you might look like the Splinter Cell guy with 3 LED's on your head.