Just to make sure you have this configured correctly...
1) Run icamsource, uncheck the auto start box. Now exit icamsource.exe completely
2) Make sure icamsource.exe is NOT running (gone from the system tray), along with any other programs that might access the camera.
3) Open ManyCam and add the camera as a source in the ManyCam settings.
4) Open icamsource.exe and add ManyCam as the camera source (it should be installed on your system as a virtual webcam...so it it should appear in the USB camera dropdown list).
5) Verify that you do not have the real USB camera added as a source.
6) Recheck the auto start box (if you had to unchecked it earlier) and click the Start button in icamsource.exe.
7) Open another program that you want to use your webcam with (such as Skype). Go to the camera source selection setting and change it to the virtual ManyCam driver and test to see if it works.
If I remember correctly, I tried updating ManyCam once...but the newer version didn't seem to install a virtual driver...so I had to use an older version of ManyCam (maybe 2.4? I think there's a thread somewhere on here where I detail it). There's a chance they fixed that issue (it's been at least a year), but if the steps above don't work for the latest version, you might look for an older version of ManyCam.