Sorry to revive an old post (from 2013 ) but this post has been VERY HELPFUL because I just encountered this problem.
Following the steps in this post helped me resolve the issue. I suggest this should be in the official FAQ.
Thank you very much for your video.
What is your CPU and graphics card?
Fraps doesn't compress the video while recording, so it can have less lag than Bandicam.
Go to Video Options of Unreal2, and reduce the game resolution to 1280 x 720, and try it again.