This is actually the intended behavior for live streaming. There is no "one size fits all" answer to this question.
If you use RTMP (a TCP protocol) the network layer is going to ensure that all packets are delivered. This is not necessarily ideal for live streaming. Using RTMFP (a UDP protocol) is generally preferred.
I can't find where I've read this before (NetStream documentation?). But Flash Player will do it's best to keep up w/a live stream. It may play the video slightly faster or drop video frames in order to do so.
This usually happens b/c of network issues and so your approach to lower the quality of the video feed is a good approach. However, the best thing to play with is the capture resolution of the camera (using Camera.setMode()).
Lowering the capture resolution will reduce the bandwidth required to transmit the video. You can use a smaller capture resolution (like 320x240) and still display it at a larger size in the Video
object (480x360). Obviously, there is a trade off you will have to make. Maybe give your users some options to set quality based on their network conditions.
The other useful method is Camera.setQuality(). If bandwidth is the issue, you might specify a bandwidth target to let Flash manage the quality based on bandwidth. Again, providing users an option to configure this.
Finally, if the problem only seems to happen on an IPad and you're confident bandwidth is not the issue, then it could be hardware related. Again, Flash will do what it can to keep the live stream as "current" as possible (my gut feeling is that it would drop frames, not play faster in this scenario).