I used camstudio (windows 7) which kind of sucks, but it was free. It was pretty finicky to get working and it's been a while since I used it, so I don't remember too well how I did it. I was never able to get both mike and in computer sound to record despite several hours of trying. I had software to convert from .avi to .flv (flash) since I didn't want to upload giant .avi files to youtube. There are better software out there, but I need a better laptop (or more likely, a desktop) to be able to run it.
I never had fuzziness problems. I did have a lot of de-syncing problems which took a while to resolve.
