instance (Monad m, MonadPlus m) => Monoid (Stream m a) where

mempty = Chunks mempty
mappend (Chunks xs) (Chunks ys) = Chunks (xs `mappend` ys)

mappend _ _ = EOF

Iteratee.hs:28:25:
No instance for (Monoid (m a))
arising from a use of `mempty'

There is a clue in the first part of the error message. Add the required instance as part of the predicate:

instance (Monad m, MonadPlus m, Monoid (m a)) => Monoid (Stream m a) where ...