The "circle" icon is just below the active picture being seen by the camera (in Record Activity / Photo tab) -- click on it to take photo. Also, it is the game key (top one with "circle" on it) --- press it to take photo.
While using the VEHO microscope with the XO, I noticed that its camera was an option -- don't know if it was a real option. I was using Linux program Cheese. I don't have the setup anymore.
The following has some infomation on Cheese and guvcview :http://www.mail-archive.com/health@list ... 00420.html