I have hated that boss since I was 9. 6-7 years later, and I still can't beat it.
Just use windows movie maker. A 1 gig .avi should be commpressed into a 20-30 megabyte file .WMV(for me anyway.) I also found a copy of VBA that (supposed) to be better for recording, as the the regular version tends to lag the sound on my files(and any attempt to do compression during the recording failed). From the test video I did, I seems to work. The file size for the .avi was higher though.