Ok so after you recorded with Fraps :
Use Virtual dub
http://www.virtualdub.org/to select sequences & compress them
Heres a tutorial on how to use it :
https://www.youtube.com/watch?v=4t1w-fc_R8E(To compress, under virtual dub, click "Video" tab and then "Compression", pick the right codec & go.
I personnaly used xvid codec, ppl says it is the best quality/size rapport
NOTE : xvid and divx compression are usually NOT for editing videos, there should be better options for editing but i dont know wich ones
NOTE2 : Quality decrease everytime you re-encode your videos so dont do it like mad
When its done, open vegas and in "project" set these options (first screenshot only - u dont need the rest right now) :
http://www.l2guru.com/forum/showthread.php?t=7590This will give you a WAAAAY better quality than the default one