As lanedance has said, in Lorentz contraction, there are two frames of reference; a ruler is at rest in one frame of reference and moves with respect to the other reference frame. In this situation, things (photons) move in two frames. This suggests considering a ruler that moves in two different frames.
In the unprimed frame, let a ruler have length [itex]L[/itex] and move (in the positive x direction) with speed [itex]V[/itex]. Let the worldlines of ends of the ruler be given by [itex]x = Vt[/itex] and [itex]x = Vt + L[/itex].
Let the primed frame move with respect to the unprimed frame with speed [itex]v[/itex]. Using Lorentz transformations to express these worldlines with respect to the primed coordinates gives (after rearrangement) [itex]x' = V't'[/itex] and [itex]x' = V't' + L'[/itex], where
[tex]V' = \frac{V - v}{1 - \frac{Vv}{c^2}}[/tex]
(relative speed!), and
[tex]L' = \frac{L}{\gamma \left( 1 - \frac{Vv}{c^2} \right)} .[/tex]
Here, [itex]\gamma = \left(1 - v^2 / c^2 \right)^{-1/2}[/itex].
In the special case [itex]V = v[/itex], then the ruler is at rest in the primed frame, and [itex]V' = 0[/itex] and [itex]L' = \gamma L[/itex] in the above equations. Lorentz contraction!
In the special case [itex]V = c[/itex], then there isn't a ruler, but [itex]L[/itex] and [itex]L'[/itex] as spatial distances between photons, and [itex]V' = c[/itex] and
[tex]L' = L \sqrt{\frac{1 + \frac{v}{c}}{1 - \frac{v}{c}}} .[/tex]
This shows that Lorentz contraction and the situation given in the original post are quite different special cases of a more general situation.
lanedance said:
hope i didn't confuse things, it has been a while since I've played with relativity...
Sorry, I didn't mean to imply anything bad about your answer, I just had in mind the above way of looking at things.