I found it!!!
Besides doing all this that i was doing on the top i also had to modprobe -i ovcamchip.
After doing a cat /dev/video i was getting device not found error. dmesg reported from ov511 that the sensor was not yet recognised. So back to the driver page (
http://alpha.dyndns.org/ov511/download.html) i noticed that i was not installing the ovcamchip module that was needed for my type of camera...
so to get a Creative Labs Live webcam (Model No PDO040) working under linux you need two modules loaded...
modprobe -i ov511 compress=1 (The 6630AE sensor transmits JPG compressed data)
AND
modprobe -i ovcamchip
After that XawTV and gqcam produce output. gqcam returns a bit of a garbled black and white output but xawtv provides a nice color image.
The quality of the picture for far objects is not the best, probably because of the compression.
Please note that the decompression presents a load to the CPU. Therefore the Frame Rate depends a lot on the speed and architecture of your system. In my 3GHz SMP P4 the framerate is more than 20 frames/second and the video out is very responsive. (It is going to be used as a sensor anyway, so the higher the FPS the better in my case :-) )