Can I stream a live video in WPF application from my web cam? If yes, then How?
You will have to use DirectX Capture or something (is not in WPF right know, so use DirectX API's directly).
Look at: WPF Media Kit. It can grab the Vista Windows desktop manager DirectX Direct3D shared Surface, and use it as a visual brush in WPF. He does some nice things with it. Look at his blog where he explains it.
I hope this helps you on your way...
UPDATE 2009-11-06: The VideoRenderElement Codeplex project has an example on how to stream webcam content. This project looks like it would fit your requirment perfectly.
UPDATE 2013-02-18: Alternatively one can use the Expression Encoder SDK. For an example you can look at the WPF-Webcam-Control article on CodeProject