Great news: Screencast-o-matic just updated to version 2.0! It seems much improved and a feature I enjoy is being able to switch the size of the webcam while recording. You can also easily record just the webcam without the screen. If you want to record a webcam with a screencast, at this point I would recommend screencast-o-matic over Camtasia.
I made a video showing what it looks like when you switch the webcam size while recording. Then, below, I share screenshots of what it looks like while you're getting set up.
You can choose to record the screen, webcam, or both. The screenshot below shows what it looks like when you're getting set up to record the screen and webcam with the webcam in the corner.
You can also remove the webcam preview altogether, which I have heard some people prefer because they get preoccupied looking at themselves :)
I mentioned in the video that the webcam acted up after a while and wouldn't work, but it eventually just figured itself out. So, I guess if that happens to you keep trying different browsers, restart, and it will hopefully work again. Now it has been working consistently.