As you've found, flipping the photo after you take it seems to be the way it was designed to work. If you want the video flipped in real-time, I don't think it does that.
A somewhat cheap solution is the $10 "iGlasses." It's a bit of software that adjusts the camera signal upstream of any applications.
http://www.ecamm.com/mac/iglasses/
It has a bunch of different controls like brightness and color and stuff like that. I have used it enough times that I considered to be worth the price.