Same Problem Here
I too have a Dell XPS with an integrated webcam, and when I attempt to stream with it I get the same message as mentioned above. I have tried multiple versions of Procaster, but all wield the same result. Neither Procaster, nor the webcam have settings that can be changed to make it work.
I have however found my own solution. You can have Dell Webcam Central up, while streaming your desktop, thus streaming your webcam indirectly.
If a Livestream worker sees this, it appears that Procaster has a problem identifying the integrated webcam of the Dell XPS laptop (thinks its an external video recording camera, instead of a webcam). If four of us have found our way here to post about it, I'm sure there are many others having this problem. I enjoy your services, but I do request that you research into this issue, and perhaps try to fix it in future updates for Procaster.