you will have to find a way to add sound to an avi or mov if you want better quality... and yes snag it is very useful in making recorded screen shots... i've seen all recoreder programs somewhere that record all the screen and the sounds coming from your speaker
SnagIt will do that. I just used it to convert a movie I made in MMF for a video-project in my German class. It won't grab the sounds directly tho so you'll need to have your mic hooked up and your speakers cranked -- but it works pretty well. Plus, SnagIt's 30-day trial isn't very smart... just set your system date within a month of when you installed it. ^^
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