Well, it's likely you will be doing some editing with all the mini clips from FRAPS. Windows Movie maker can export in wmv, the file size decreases dramatically, but you get a big loss of quality as well.
Conversion always degrades quality as well, especially if you're end intention is a YouTube upload (another conversion there as well). Look into the options in the FRAPS application and see if there's a way to change what codec it's using to encode the data. It might be set to something ungodly like avi raw which would generate monstrous file sizes. If possible, try changing it to mpeg 4.
Fraps always uses it's own codec, it is rather good but limits the hue quite a bit.
Using MPEG 4 ASP or AVC is a bad idea for recording. You could only record with one pass encoding which is quite useless.
Whenever possible try to use a lossless codec as long as possible before you do your final encode. Huffyuv is excellent for that.
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