USB 2.0 has higher transfer rates than the previous versions i.e USB 1.1. in this case shouldnt really matter bcuz (i) most USB cards sold today are USB 2.0, and (ii) your application i.e the webcam doesnt need the bandwidth that is offered by USB 2.0. the difference between the versions of USB can be seen only when using USB mass storage devices like my apple ipod or memory sticks or usb cd writers/rom drives etc.
btw ask ur frend to get more RAM. i don't think he'll be able to see much except still pictures from the webcam with this kind of configuration.
better still, ask ur friend to junk that system. it might have antique value
<no offense>