Tracking pen within whiteboard surface
The technology used by Microsoft Kinect is possibly the most cost-effective solution for the stated requirements. 

The approach consists of a digital video camera / webcam at the sensing position, with a field of view covering the area of interest. In order to consistently locate the target object to a 1 cm precision, the camera must be able to capture a minimum resolution  of 1 pixel for every 0.5 cm. This translates to 200 pixel resolution for the long edge, and 100 pixels for the short edge, at the bare minimum.

This is comfortably covered by using a 640 x 480 VGA resolution webcam, providing sufficient oversampling for enhanced precision if needed.

Depending on the processing power available to you, sampling precision and position update rates can be changed, to meet your unspecified "real-time update" rate requirement. 

Alternatively, the Kinect SDK released by Microsoft (and a Kinect device) would allow a rapid prototyping of the requirement in a matter of hours. Then, depending on performance and price considerations, the final approach can be worked out.