This worked for me
- although I only tried it with a Windows client - I didn't have VLC on an attached machine and couldn't get another copy of VLC to connect to the stream on the server itself i.e. two copies of VLC on the same machine.
Admittedly I only gave VLC about ten minutes of my time as I have been mucking about with other solutions to this as an experiment. I ended up writing something in python using the twisted library and an imaging library - I'm still working on this so i wouldn't want to share it just yet !
There seem to be a lot of solutions to work in tandem with a web server but not that many stand alone streaming engines so I think VLC is possibly the best bet given the time to explore.