I use fraps (paid version) to record all my stuff too ... here's what I do to automate my video encoding to a good quality .wmv:

1. download and install windows media encoder (free) from here: http://www.microsoft.com/windows/win...r/default.mspx
2. created a directory for all my videos (i used <d:\media\fraps> and set fraps to record movies there
4. I created the following "encode.bat" batch file in <d:\media\fraps> to automate the encoding:

Code:
@echo off 
REM Get bare directory listing 
@FOR /f "delims=" %%? IN ('DIR /b *.avi') DO CALL :ENCODE "%%~n?"
GOTO :eof

:ENCODE
REM Skip file if it's already been processed
IF EXIST "%~1.wmv" GOTO :EOF
ECHO ---------------------------------------------------------------------------
ECHO Encoding  "%~1.avi" ...
ECHO ---------------------------------------------------------------------------
SET "currentFile=%~1"

cscript "c:\program files\windows media components\encoder\WMCmd.vbs" -input "%currentFile%.avi" -output "%currentFile%.wmv" -v_mode 1 -v_bitrate 5000000 -v_keydist 30 -v_buffer 10000 -v_quality 100
GOTO :EOF

:EOF
@ECHO All done!
Every time I run "encode.bat" it crawls my <d:\media\fraps> directory and encodes any .avi file that hasn't already been encoded. I use a decent bitrate to encode the video at the original recorded resolution. 4GB files encode to roughtly 80-90MB, and you can still read all the text quite clearly. You can adjust the quality as needed (use cscript WMcmd.vbs /?" from dos to get usage).

It took me awhile to find the right encoding settings to use, but now that i've got it down, It's taken all the tedium out of encoding my videos (did i mention it's all free?). Hope this helps someone.