Like many good threads on this forum, I think this one has already been laid to rest. In an effort to keep it going, I'll update my previous post so that anyone who is vaguely interested may also do some research.
The free program I mentioned, but nobody asked about, is a FRAPS alternative called Taksi. To find it, just Google Taksi. It was last updated about two years ago, but despite many excellent reviews, I can't get it to work with Trainz. This could be a problem with the program trying to communicate with Trainz or a quirk with Trainz itself. If a person from Auran stumbles over this thread, maybe they would like to comment. Even if you can get it to work yourself, it doesn't record sound.
The free version of FRAPS isn't all that bad despite the 30 second time limit. Just keep watching the frame counter on the top left. As soon as it changes from red to yellow, wait two seconds and hit the F9 key again. Then you will get an additional lots of 30 seconds until your hard disk freezes up. Although FRAPS records sound, each 30 second file is 350 meg in size. That's 700 meg or one CD for each minute!
The method I've had the most success with is to use a program like CamStudio (free) Screen Show (similar to CamStudio but better) for between $5 and $40, 0r Camtasia for around $200. All will record sound but it really does slow down the frame rates, plus the sound is really broken up. The best thing to do is forget about ambient sounds and record a suitable sound track later. These programs also use incredible amounts of resources and disk space so it's necessary to modify Trainz options to get good results. After some experimentation I was able to get "Screen Show" to record 4.5 minutes to the megabyte. That's just 220 meg for a full ninety minutes! Having said that, these programs save the video to memory before compressing. I think the 2 gig of memory on my machine can only handle 5 minutes of recording before everything blows up!
This next paragraph may help you understand some of the difficulties associated with video capture: Firstly, your computer is trying to do three very complex tasks at once. (i) Play a game (ii) record the activity (iii) save the recording. It requires a very powerful CPU do all these things. Secondly, capturing a moving picture on your screen is just the same as taking a screenshot of a still picture, except the screen is photographed as many as 30 times a second to catch the action. Each video frame is just a JPG that's eventually blended to create an AVI. This accounts for much of the jerking motion you see, but additional jerking is also caused by the CPU doing many things at once.
In conclusion, I'm not really that interested in this subject, but if there is enough enthusiasm amongst the forum membership, I'll continue with my experiments and put the results up on my web site. In the meantime, I'd like to hear from people who have already achieved some kind of result.
Another way it can be achieved is by saving the screen via a video capture card. I'll be testing this later when I get my new capture card working.
good luck