Probably because your vbr (bit rate) is only 800 kb / sec.

Try these settings:

I want to use a different encoder and I am not yet thrilled with the final results AND it takes 70% CPU use off a quad core.... (although I am playing WoW at max settings and some other stuff too) BUT it records in close to real time at decent frame rates and lets me play WoW with decent framerates.

"C:\Program Files\VideoLAN\VLC\vlc.exe screen:// --screen-fps=30 --sout=#transcode{cropbottom=1280,vcodec=mp2v,vb=409 6,scale=1,width-800,height=640}:std{access=file,mux=ps,dst=c:\frap s\test.avi}}'"

The above does not record audio and it records at 800 x 640 and saves it as C:\FRAPS\test.avi. It records on screen 1 only and cuts the screen in half (because I play on half of 30" screens). If you remove the crop bottom=1280 that should fix it.