Wouldn't something like this be easier to encrypt for transmission than normal video? Plus, in the case it comes up, "that ascii representation doesn't look anything like me and you can't prove it was me."
Why would it be any easier to encrypt? It's data just the same.
I wouldn't rely on terrible quality video for plausible deniability but if you want to there are of course many ways to make your webcam feed shitty looking.
Easier in the sense of less data, which would make it faster. One of the issues with encrypted video chat is that most implementations have a max amount of people you can chat with because of the computing overhead.
Text is extremely compress-able. Admittedly, this is not common text, and is many "snapshots" of the whole screen, but I believe LZ-based compression would still be extremely effective on this data. The OP above said it can only be one of ten characters, and one of 256 colors, and a 100x40 grid, so it would likely require similar data rates to get this level of quality from a video stream, I would think, since the 10 characters provide more visual information than a simple colored pixel of that size could convey.
The text here may compress well, but only because the original video has been "decompressed" into an incredibly inefficient encoding in the first place. If you want to transmit this efficiently, then downscaling the original video and encoding it efficiently using a standard video codec and rendering it to text client side would be vastly more efficient.
I like it.