Makes the game lag? Chances are your PC has a hard time recording and processing the data. Knowing the specs of your PC, particularly RAM, Processor, Graphic Card, would give me a better view at your computer.
I have the next setup, maybe this can help set yours:
Video:
Encoder: H.264 (However, this is like this because my actual ISP, or more like my contract with them, cannot handle the other encoder. My bandwidth isn't high enough for VP6)
Outbut: 512 x 384
Aspect ratio: 4:3 (lock ratio)
Target Frame rate: 25 fps
Target Bitrate: 350
Keyframe intervals: 3
Deinterlacing: No
Audio:
I use both a microphone (at full volume) and speakers (A little below half)
Target Bitrate: 48
Sampling rate: 22050
Channels: Mono
Audio Encoder: MP3
Meter Standard: Digital.
I always use Screen to record and I always changes my screen resolution to 1024 x 768 (both for practical and performances reasons)
Needless to say, the more things and visual effects you have running, the more punishment your graphic card receives. I don't exactly know how this applies to Procaster since that program not only records but also uploads and broadcast the video. But it mustn't be that different from Fraps
For Fraps, whenever I know I will be playing a very heavy game that I know Fraps has problems with it, I try to close any program I'm not using and, since I'm using Windows 7, switch the visual theme to Classic, since that turns off all the fancy Areo features that only serve as eye candies.
Hope this helps