I use Fraps (which i had to pay for) to capture, VirtualDub (which is free @ virtualdub.org) to compress, and I use the free Xvid codec in Vdub to encode with.
I used to use WindowsMovieMaker, and tried the trial version of Vegas, but didn't like the quality in either. If i could get the simplicity of WMM in vdub, i would be laughing...
BTW, i capture in full definition, (1680x1050), so at times i could have up to 80 GB of vid which mostly gets deleted immediately. After compression, a 5 minute video is around 700-800 mb in size. I do NOT have to resize to get it on youtube, and anyone can play the HD version there. For an example of my latest video, check the thread on this forum 'Canadian Camo Vid' and tell me what you think of the quality.
I haven't bothered messing with any effects or titles, that vid is pure Fraps and Vdub with Xvid codec.
link: http://ca.youtube.com/watch?v=bQM4mBO3dz8 ....and watch in HD of course!