Look into existing federal (GSA/DoD) and state level programs which provide surplus technology to schools. These programs aren't just for getting military-grade hardware to rural police forces, they can actually be used for the benefit of the public as well. For added bonus, create/participate in a student-run club which discovers, writes, and submits grant requests for student/school needs like this.
To get you started:
GSA Eligibility Info: http://www.gsa.gov/portal/cont...
Find your State Agencies for Surplus Properties: http://www.gsa.gov/portal/cont...
DoD Defense Logistics Agency: http://www.dispositionservices...

I went looking across their website and can't find a download for their server code. Do you know where to get this? If I can get a copy of their server API (to their clients), I can set something up on google app engine or the like....

I was thinking along the same lines, as well. Encryption for real-time video, however, always comes at a cost of increased bandwidth, more equipment (COMSEC modules), and of course, more cost. Not to mention the added points of failure.

Another thing I was thinking about was how easy it would be to become overdependent on technology such as this. Lets look at it like military arms. Country A designs and deploys this new fancy aircraft that is capable of higher altitude flight than Country B's ARCFT and surface to air missiles (SAMs). That aircraft costs $5mil. Country B is able to create a SAM or look-up missile from an interceptor at a cost of $20k. What is to say that if these cameras see large-scale deployment that crooks (smart ones) won't buy some WiFi noise jammers and completly destroy that spectrum. If the police rely on this too much (ie train on it to a point where they are ineffective or severly debilitated without it) than the crooks would have the upper hand.

We should be careful releasing technical information, especially limitations, to our military and law enforcement equipment.