Actually the whole problem is a bit more complex than you might have thought in the beginning. Let's look a it this way: when you move your camera through the world, things that move close to the camera move faster than the ones in the background - so objects at different depths change their relative distance (look at your finder while moving the head and see how it points to different things). This means the image actually transforms and does not only translate (move in x or y) - so how do you want to accompensate for that? What you you need to do is to infer how much the camera moved (translation along x,y and z) and how much it rotated (with the angles of yaw, pan and tilt). This is a not very trivial task but openCV comes with a very nice package: http://opencv.willowgarage.com/documentation/camera_calibration_and_3d_reconstruction.html
So I recommend you to read as much on Homography(http://en.wikipedia.org/wiki/Homography), camera models and calibration as possible and then think what you actually want to stabilize for and if it is only for the rotation angles, the task is much simpler than if you would also like to stabilize for translational jitters.
If you don't want to go fancy and neglect the third dimension, I suggest that you average the optic flow, high-pass filter it and compensate this movement with a image translation into the oposite direction. This will keep your image more or less in the middle of the frame and only small,fast changes will be counteracted.