I've googled around to see other ways to test. The only I've come across that is helpful so far is VLC. Trying to open /dev/video0 I get the following output on the command line:
[0x17693c0] v4l2 demux error: cannot set input (Device or resource busy)
[0x17693c0] v4l2 demux error: cannot set input (Device or resource busy)
[0x1589b20] v4l2 access error: cannot set input (Device or resource busy)
libv4l2: error attempting to open more then 16 video devices
[0x1589b20] v4l2 access error: cannot set input (Device or resource busy)
[0x174f830] main input error: open of `v4l2:///dev/video0' failed: (null)
Then I thought to go back to cheese and run it from the command line to capture some output. I get this:
ubuntu@ubuntu:~$ cheese
libv4l2: error setting pixformat: Device or resource busy
So it seems somehow that /dev/video0 is getting 'grabbed' up by something else, but I don't know what?! It's as if the fix could be what the OP did, just unplug it and replug it, but I can't do that in this case.. any further suggestions?