ogome28:
Do you guys know of any affordable (under $50) camera that can do what I want
There are plenty of cheap USB cameras with that sort of resolution.
ogome28:
and also interface with the arduino without any problems?
No. Conventional wisdom is that Arduinos simply don't have sufficient resources to process images of that size. You might conceivably find that some of the higher spec Arduinos have enough memory and processing power to deal with it, but I haven't noticed any reports of anyone managing this sort of thing - you'd be blazing the trail, and I suspect you'd find it was simply not possible.
ogome28:
Also do you guys have any source codes for position tracking using camera?
OpenCV is great for that sort of thing, but needs a PC or comparable machine to run on.