Fraps is going to take a toll on your FPS. You need to have a good CPU and Video card combo to pull get a good constant frame rate. I have a Core 2 Duo at 2.66ghz, 4gb of Ram, and an 8800 GTS 640mb. I record my Fraps movies at about 1150x800 (or something) resolution. Unless there are a lot of planes, rarely do I get sub 40 FPS when recording (mostly 60 FPS). Since MAGIX apparently can't handle large files, there's really no way around it (that is if you want to improve video quality). You'll probably have to stick with the 640x480 resolution restriction that the Film Viewer AVI setting has. The higher the recorded resolution, the better the image quality (along with other factors as well, but this is a biggy).
Adobe Premiere and Sony Vegas do offer Free Trials if you're interested. Sony Vegas is probably the best value at about $80 (for their non-pro version). Premiere is $500+ IIRC.
Since Fraps captures steaming video, you really can't decrease the load it does on your computer unless you lower it's resolution capture settings.
I know older games such as the original Half-Life allowed make movies from exporting hunders of screenshots. That is, you could set it to take a screenshot every second or 2 every second and it would export .bmp image files for however long you wanted. Of course, a .bmp file (depending on your screen resolution) would be from 2-3mb per file. So that took up a lot of space as well, but wasn't really load instensive when building a movie in movie programs. Alas, I haven't seen a game that does movie making like this any more.
