Hey TequilaChaster. Sorry for my terrible wording.
To answer a few of your questions...
First off, as Stream stated, I would hold off on compressing any of your files until you are finished with the product. Edit your project FIRST, THEN compress it at the end.
If you fly in 1024x768 resolution, then choose the option "Half-size" under your Movies tab. Otherwise, I highly recommend changing your game resolution to 800x600 and recording at half-size if you are getting low fps. Like Stream said, you can record at 15 fps, then use virtual dub or some other software to speed it back up. (Only if you have framerate troubles recording at 25-30 fps do you switch to 15 and double the speed later)
To answer the second part of that question, your final product may or may not be your recording resolution. Many of the Video Editors have the option as exporting your movie file at a certain resolution (other than the one you recorded at) - Lets say I record at standard 800x600 Full-size (30fps). If I go into Adobe Premiere, I have the option to change the resolution of the file when I save it. Simply go to File>Export Movie File>Settings>Video tab> and it should give you the final resolution settings in which you can modify.
Next you were talking about compressing the file. What you would do in this case is go to Export Movie File in Premiere, then click on Settings, and under the General tab make sure Microsoft AVI is selected for the File Type. - Next go to Video and select the Divx 5.2.1 Codec (or any other version you have) and click Ok. - You can also change the frame rate aswell in this tab.
I think that clarifies most of your questions. Good luck.
