I know this is an old post, but I thought I’d share my experience. Yes, it is definitely an oversight that Webcam-XP, (and maybe NCS) do not have an option to automatically re-connect a camera that goes offline. I use several Logitech cameras and C525 is among them. I notice these cameras never seem to disconnect when using the manufacturer’s software, even running for days. So it likely is automatically reconnecting. But with Webcam-XP, the camera may disconnect (easily evidenced by the camera’s lens-side “on-light” going out) , and the software obviously doesn’t check. As you’ve seen, it just sends the same last available image in the live web broadcast, and any photo’s emailed or sent by FTP will be old as well. Of course you can re-connect with no problem, but it IS a problem if you’re not home, and the “administrator” screen won’t allow re-connecting the camera.
So anyway, while there is nothing we can do about the software not having an 'auto-reconnect" feature, I have noted that the problem NEVER happened (after 4 days of testing anyway) with the camera plugged directly into the PC. That led me to realize that even though the camera initially connects through a long 15-foot USB cord, the communication is likely very marginal, and the driver has limited ability to compensate. On the longer cord, eventually I would hear the familiar “windows” tones you hear when a USB device plug is pulled and replaced. So, since I needed to place the camera away from the machine, I tested with a much higher quality USB extension cable, and now the camera stays connected day after day.
Moral of the story, cheap USB cables look just like expensive ones, but there is a difference. Any USB device that needs to be reliable without the benefit of a human standing by needs better cables, and even more so as the length increases. At the very least if they aren’t shielded cables, they are probably junk.