I've done all of my Let's Play videos (for YouTube) so far with CamStudio 2.0. Most of what I've done so far have been DOSBox games, which are well-suited to recording as a "fixed region" (mine is 640x400). I've also done a Let's Play of King of Dragon Pass, which is a Windows game and plays "full-screen"; however, the screen graphics cover only a portion of the screen (640x500, I think), so "fixed region" works with that game, too. However: a) the larger the region, the larger the file size (my KODP episodes were typically at least 20% larger than a DOSBox game episode of the same length); and b) newer games with a lot of on-screen animation (such as the Baldur's Gate series) don't seem to play nice with CamStudio (but anything that runs in DOSBox will usually record just fine). I use the CamStudio Lossless Codec 1.4 with CamStudio 2.0, and I have the "Use MCI Recording" box checked in Audio Options. I followed TBritton's instructions for setting my Windows 7 computer up to record both gameplay audio & narration through the stereo mix. (I had his YouTube series of CamStudio tutorials up while doing the setup!)
You may get even better results trying Jawor's Xvid, which will allow larger regions like 1280X720 without any degradation and with small file sizes yet!